Expenditures of the Sino-Japanese War

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Publications of the

Carnegie Endowment for International Peace

Division of Economics and History
John Bates Clark, Director

JAPANESE MONOGRAPHS

EDITED BY

BARON Y. SAKATANI, D.C.L.

Formerly Minister of Finance of Japan

Conscription System in Japan, by Gotaro Ogawa.
Expenditures of the Russo-Japanese War, by Gotaro Ogawa.
Military Industries of Japan, by Ushisaburo Kobayashi.
War and Armament Loans of Japan, by Ushisaburo Kobayashi.
War and Armament Taxes of Japan, by Ushisaburo Kobayashi.
Expenditures of the Sino-Japanese War, by Giichi Ono.
War and Armament Expenditures of Japan, by Giichi Ono.

EXPENDITURES OF THE
SINO-JAPANESE WAR

nc

BY

GIICHI ONO

Councilor of Finance Department

NEW YORK
OXFORD UNIVERSITY PRESS

AMERICAN BRANCH: 35 West 32nd Street
LONDON, TORONTO, MELBOURNE AND BOMBAY

1922

COPYRIGHT 1922

BY THE

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE

PRINTED IN THB UNITED STATES OF AMERICA
AT THE RUMFORD PRESS, CONCORD, N. H.

NOTE BY THE DIRECTOR

The plans of the Division of Economics and History of the
Carnegie Endowment for International Peace have been
transformed by the World War. Problems now calling for
study transcend in importance those with which this Division
has been dealing and material for research and record so far
transcends any that was formerly available that it will demand
almost exclusive attention for some years to come. A new
world has evolved suddenly out of the world which we knew
and the transformation extends to the foundations of gov-
ernment and of economic life.

The process of warfare itself is now so unlike that of former
days that many military rules of the past have gone into the
scrap basket. The late war ended when its deadliest tools
had barely been brought into action. The peoples have
fought as they had worked, by machinery, mechanical and
chemical engines of destruction have decided the result and
will decide in like manner the result of all wars of the future.
Machine shops and chemical laboratories will so largely
determine what armies shall win that fighting strength will
be as much a matter of available capital and of science in
applying it as of numbers of troops and strategy in directing
them. It is safe to say that the death dealing arts and instru-
ments will far surpass in destructiveness those which made
the late war so deadly, and to a soldier of the future the order
to march into a cloud of poisonous gas and a whirlwind of
missiles will resemble an order to plunge into the rapids of
Niagara. This is one central and obvious fact which the
war has taught us and it has many corollaries, some of which
have to do with the increased costs of war and the importance
of the particular resources that make a nation powerful for
offense and defense; but there are less conspicuous economic
facts which are more fundamental, since they may determine
where and when, if at all, wars shall hereafter occur.

Causes of warfare are always partly economic and those
which incited the recent one were mainly so. The business
plans of a powerful state reached to the ends of the earth

Vi NOTE BY THE DIRECTOR

and so crossed and interlaced the claims of other states that
some writers, then and afterwards, pronounced the war inevi-
table. If we assume a settled purpose on the part of such a
state to encroach on the rights of others, we may say that it
doubtless was inevitable. The victory of the defending
countries has saved them from an immediate and intolerable
domination, but it can not be taken as an assured fact that
similar attempts will never again be made. The economic
inducement continues and the means may at some time be
forthcoming.

Within the several states war has democratized industry,
giving to labor an increase of .control — a change that if con-
tinued will entail momentous consequences; but still greater
effects have been produced on the relations of states to each
other. The world as a whole has changed more than its
component parts and the new relation of the parts to one
another is the critical element in the situation. The great
increase in the economic functions of governments is one
cause of this condition. Within the great international com-
munity in which the several states are units extensive eco-
nomic functions have gravitated into the hands of govern-
ments and caused them to face each other as business rivals
and to deal with each other in a multitude of ways in which
the merely self-seeking policy of private business is intoler-
able. Power to invoke principles of justice and international
law as interpreted by a competent court has become an in-
dispensable means of allaying strife and this fact exalts to
supreme importance the high court of nations which has just
been established. It magnifies also the importance of the
economic facts and principles with which the law itself will
have to deal. It is not merely individual men or private
corporations who now meet each other in the rough and
tumble of a world-wide mart but states themselves, each
representing its own population and seeking to foster its
interests as a zealous and faithful agent. The chances of
friction that are inherent in ordinary commerce inhere today
in vast international transactions and will increase in the
measure in which the intercourse grows. All this means a

NOTE BY THE DIRECTOR Vll

great increase in incentives to warfare, on the one hand, and
in the motives for preventing it, on the other. Private com-
merce unites more than it separates those who participate in
it, and it remains to be seen whether international commerce
will act in the same way; but, in view of what modern war
means, the human race will deserve to perish, and much of
it will probably do so, if the forces of strife are allowed to get
the upper hand. Whether they will or not — whether the
recent economic changes will tend to reduce warfare or to
increase it — depends on the ability of nations to create and
maintain the instrumentalities that in the new state of the
world are necessary.

Certain it is that the feeling which prevails today, the
world over, is not one of security. The dread of further war
is greater than it was before 19 14. In some areas war still
prevails, in others peace is held by a precarious tenure and
in all it can be firmly established only by conscious and intel-
ligent action by the states themselves. Mere exhaustion
holds war dogs temporarily in leash, but it will take more
than that to tame them as they must be tamed if peace is
to endure.

We here confront a wide difference between the several
states in comparative desire for peace and disposition to
maintain it. One portentous fact is the grim determination
of Russian communists to extend their system by crude force
from state to state. Bolshevism is government by the few and
largely the bad masquerading as government for and by the
people. In its mother country, Russia, the economic meas-
ure by which it began its career was confiscation of private
wealth — in itself an ultra-democratic measure. If this had
brought in a true communism, it would have been a ruthless
and unjust measure for creating a peace-loving state. A
just and orderly democratizing of industry in the several
states would give new strength to the forces of peace, and it
would be highly improbable that any state so influenced would
try to extend its system over foreign countries by military
invasion. Democracy, socialism, communism and bolshe-
vism all appear in the aftermath of the war. The first of

Vlll NOTE BY THE DIRECTOR

them makes for future peace and so does even the conserva-
tive element in the second, while all els6 in the series means
certainty of civil strife and danger of international war.

The fact that during the war governments had to take on
innumerable functions that were formerly in private hands
has lent an impetus to socialism and to the perverted growths
that have accompanied it, and it has created a new inter-
national system the meaning of which is profoundly signif-
icant, though he who runs can not so easily read it. There
are dangerous features in the system which the war evoked
and, happily for mankind, there are available safeguards
which were evoked with them and need to be retained if
human effort can do it.

By a compulsion that there was no resisting, the war forced
the nations of the Entente into economic cooperation with
each other. Commissions centering finally in the Supreme
Economic Council adjusted in a harmonious way questions
that would otherwise have led to rivalry and conflicting
action in purchasing war materials, securing ships, appor-
tioning food, controlling railroads, financing the war and
doing a multitude of other things with the one common pur-
pose of victory. The special compulsion of the struggle is
over, but it has left an aftermath of issues grave enough to
make peace insecure unless something equivalent to the
Supreme Economic Council survives in full efficiency. The
agency that did so much to win the war can do so much to
prevent another one, but to that end it will have to be guided
by economic principles and it is a saving fact that these still
survive. The war has not abolished the law of demand and
supply, though governments may forget it. In the coming
era they must build better than they now know. Economic
knowledge must either go in advance of action and prevent
disaster or follow action and be learned from disaster. Be-
yond computation is the importance of attaining the knowl-
edge and using it when evil impends and prevention is possible.

John Bates Clark,
New York, Director.

September 27, ig20.

AUTHOR'S PREFACE

When Japan emerged from the old regime and instituted the
present system of government at the time of the restoration of
the governmental power to the Emperor, she was beset with
many troubles both from within and without and the future
destiny of the Empire seemed hanging in the balance. Yet,
within no more than half a century, extraordinary changes
have taken place and Japan has today become one of the great
Powers, having developed her present state of national power
and prosperity in that short period. Such a record is hardly
paralleled in any other country. Japan's history, therefore,
during the fifty years of the Meiji Era, has, it is needless to say,
a unique place in the history of the world, while the Sino-
Japanese War, which is treated in this book, has likewise an
especially important position in this period of Japan's history.
There are two reasons for assigning to it such special impor-
tance: one is the effect of that war upon Japan; the other is its
special effect upon China and the various foreign countries
which had interests in the Far East. I shall, for the sake of
convenience, call the former the internal, and the latter
external, effect.

The Sino- Japanese War was the first international war in
which Japan had engaged since the restoration of Meiji. At
first the people generally did not believe in the possibility of
final victory, but fortunately for them the laurels were
awarded to Japan at last. The nation then, for the first time,
realized the latent power which she had been conserving since
the restoration, and henceforth Japanism as opposed to the
Europ^anism of the ante-bellum period has been encouraged,
and the nation has constantly planned for the development of
this national power to the fullest extent. Now this new
national consciousness may be considered as the internal effect
of the war. At once Japan made remarkable progress in all
directions. The enlightened measures adopted, together with

ix

X PREFACE

the resulting economic development, furnish materials for a
valuable discussion of the effects of the war and for an authen-
tic history of the nation's development in modern times. As
for the external effect of the Sino- Japanese War, it had a
special significance, in its exposure of the weakness of China.
The loosening of the national bond of unity of China had long
been foreseen by intelligent observers; but the Sino- Japanese
War clearly showed the accomplished fact to the world.
Consequently, both Europe and America, who have for many
years kept watchful eyes upon enterprises in the Far East,
realized that their opportunity was at hand. They vied with
each other in efforts to secure concessions, so that Far Eastern
affairs assumed special importance in reference to the world's
political and economic questions. All this was a result of the
Sino- Japanese War.

Such were the internal and external effects of this war. As
for the economic effects, they too have been very great. They
have completely changed the economic relations of the Far
East. Consequently, a discussion of that war in its relation
to Japan and especially to the economic conditions of the Far
East will help greatly in making clear how the new situation in
the Orient has been brought about. The value of such dis-
cussion is immeasurable. While, to be sure, this book does
not go so far as to treat of the external effects of the war, yet,
even as a discussion of the internal effects alone, the work
forms a valuable history of the economic development of
Japan. From this point of view it may be seen how important
the Sino- Japanese War was in the economic development of
Japan.

The author of this work, Mr. Keiichi Asada, has long served
in the Department of Finance, where he has been actively en-
gaged in work relating to money circulation and finance.
The figures which are assumed as basis of the arguments in
this book were obtained after careful investigation and are
trustworthy in the highest degree. Today, any one who
wants to make investigations of the same kind must depend
upon the materials in the possession of the Department of

PREFACE XI

Finance. The author has made good use of these materials.
And there is only one thing to regret. That is, that, on
account of the limited scope of the present treatise, the author
could not adduce additional figures in proof of his arguments.
However, he has not failed to grasp the general principles
underlying those figures, and to this fact the present editor,
in his concluding remarks, desires cordially to attest.

GiiCHi Ono.
Tokyo, Japan,
May^ igi6.

BIBLIOGRAPHY

AsADA Keiichi, Treatise on the Fluctuation in Prices of Commodi-
ties in Japan since the Meiji Restoration, and the Cause thereof
(Meiji I shin igo ni okeru Wagakuni Bukka no Hendo oyobi Sono
Genin ron) 191 2.

Currency System Investigating Committee, Report and Supple-
ments {Kahei seido Chosakai Hokoku oyobi do Furoku), 1895.

Department of Finance:

References for Monetary Circulation (Kinyu jiko Sankosho),

1899-1910.
Report of Financial Readjustment after the Sino-Japanese War

(Niju shichi hachinen eki Sengo Zaiseishimatsu Hokoku), 1900.
Comparative Table of Figures for Forty-one Years relating to

Foreign Trade of Japan {Dainihon Gaikoku Boeki Shiju

ichinen Taishohyo), 1909.
Annual Reports on Foreign Trade of Japan (Dainihon Gaikoku

Boeki Nenpo), 1 882-1910.
Annual Reports of the Department of Finance (Okurasho Nenpo),

1875-1911.
Annual Statistical Reports of the Bureau of Taxation (Shuzei-

kyoku Tokei Nenpo), 1885- 19 10.

General Staff of Japan, History of the Sino-Japanese War
(Nisshin Senshi), 1904- 1907.

Inaba, Kunzan, Complete History of the Ching Dynasty (Shincho
Zenshi), 1914.

KoBAYASHi, Ushisaburo, Treatise of Adjustment of Finance
{Zaisei Seiri Ron), 19 12.

Oriental Economics Publishing Co., Finance and Economy after
the Sino-Japanese War {Niju shichi hachinen Sengo no Zaisei
oyobi Keizai), 1903.

Sakatani, Y. (representing the authors), History of Finance of the
Meiji Era {Meiji Zaiseishi), 1904.

Statistics Bureau of the Cabinet, Annual Statistical Reports of
the Japanese Empire, Nos. 1-34 {Nihon teikoku Tokei Nenkan),
1882-1911.

Takizawa, Naoshichi, Treatise on History of Japanese Money Cir-
culation (Nippon Kinyu Shiron), 191 2.

Yoshida, Togo, History of Ancient Japanese-Korean Relations
(Nikkan Koshi dan), 191 1.
xii

EXPLANATORY TABLES

Value of Japanese Currencies

Japan adopted the gold standard system in 1871, but the inconvertible paper
money became principal currency a few years later. In 1886 the paper money
became convertible into silver and after that date the Japanese currency system
was the silver standard de facto, until on October i, 1897, the gold standard system
was legally adopted. The figures necessary to ascertain the value of Japanese
currencies are given below:
(i) I gold yen (according to Coinage Law of 1871) contains 1.5 gramme pure gold.

(2) I gold yen (according to Coinage Law of 1897) contains 0.75 gramme pure gold.

(3) I silver yen contains 24.261 gramme pure silver.

(4) The value of i silver yen in the English currency (according to the demand

rate of exchange on London in the average of the year) is as follows:

s. d.

... 4.02.0

. . . 4.00.8

... 3. II. 2

... 3. II. 7

1878 309-4

1879 3.08.0

1880 3.08.9

1881 3.08.4

1874
1875-
1876.
1877

1882.
1883.
1884.
1885.
1886.
1887.
1888.
1889.

s. d. s. d.

3.08.8 1890 304-5

3.07.9 1891 2.02.6

3.07.9 1892 2.10.5

3.06.0 1893 2.06.7

3.03.2 1894 2.01.2

3.02.0 1895 2.01.3

3.01.0 1896 2.02.0

3. 01. 1 1897 2.00.4

(5) The value of i yen of paper money in the English currency (calculated on the
basis of the above mentioned exchange rate and the quotations of the silver
price in the Tokyo Exchange in the average of the year) is as follows:

d. s. d. s. d.

1877.
1878,
1879.

s.

3. 10. I
305. 6
3-00.3

1880,
1881.
1882.

s.
2.06,
2.02.
2.04

1883.
1884.
1885.

2.10.7
304. 3
303. 7

(6) I ryo (unit of value of the old currency system) was declared in the Coinage
Law of 1 87 1 to be equal to i yen.

Chronological Table

Meiji

1st

1868 A.

D.

Meiji 15th

2d

1869 '

' i6th

3d

1870 '

' 17th

4th

1871 '

' i8th

5th

1872 '

' 19th

6th

1873 '

' 20th

7th

1874 '

' 2ISt

8th

1875 '

' 22d

9th

1876 '

' 23d

loth

. 1877 '

* 24th

nth

1878 '

' 25th

1 2th

1879 '

' 26th

13th

1880 '

' 27th

14th

1881 '

' 28th

1882 A.

1883

1884

1885

1886

1887

1888

1889

1890

1891

1892

1893
1894

1895

D.

Xlll

XIV

EXPLANATORY TABLES

Chronological Table — (Continued)

Meiii29th

1896 A.

p

" 30th

1897

•• 31st

1898

•* 32d

1899

*' 33d

1900

" 34th

1901

" 35th

1902

" 36th

1903

" 37th

1904

" 38th

1905

" 39th

1906

" 40th

1907

Meiji 41st

1908

" 42d

1909

" 43d

1910

" 44th

1911

Taisho 1st /

1912

2d

1913

" 3d

1914

" 4th

1915

" 5th

1916

" 6th

1917

A. D.

Weights, Measures and Money
With English, American, French and German Equivalents

Japan

Ri = Z^ Cho
= 2,160 Ken
= 1 2, ()6o Shaku.

Great
Britain

2 . 44030
Miles

•Ri (Marine) ( Un^P

1 Miles

Square Ri

/ 5 95505
\ Sq. Miles

U. S. of
America

2.44029
Miles

115151
Miles

5 95501
Sq. Miles

France Germany

3 92727
Kiloms.

I. 85318
Kiloms.

3 .92727
Kiloms.

I. 85318
Kiloms.

15 42347, 15-42347
Km. Carres Quadrat Km.

Cho = 10 Tan
— lOoSe
= 3, coo 5m,

2.45064
Acres

Tsubo =10 Go / 3 • 95369

= 100 Shaku.. . . \ Sq. Yards

2.45062
Acres

3 95367
Sq. Yards

99 17355
Ares

3 30579
Centiares.

99 17355
Ar.

3 30579
Quadratm.

Koku = 10 To
=^ 100 Sho
= 1,000 Go

10,000 Shaku.

.1

4.96005
Bushels

Koku (Capacity of/i/ioof
ship) \ one Ton

'47 65389

Gallons (Liq.)

5. I 1902
^ Bushels (Dry)

i/io of
one Ton

Kwan

■■ 1 ,000 Momme
10,000 Fun
100,000 Rin.. .

Kiri" 160 Momme. . .

Yen » 100 Sen
«- 1 ,000 Rin
= 10,000 Md.

8.26733 8.26733
lbs. (Avoir.) lbs. (Avoir.)
j 10.0471 1 10.0471 1
[ lbs. (Troy) lbs. (Troy)

'1.32277 1.32277
lbs. (Avoir.) lbs. (Avoir.)
1.60754 1.60754

^ lbs. (Troy) lbs. (Troy)

2.0.582
8. d.

o . 4984
Dollar

I. 8039 I
Hectolitres

i/io

de Tonne

3 • 75000
Kilogs.

0.60000
Kilogs.

2.583
Francs

I. 8039 I
Hectolitres

i/io
Tonne

3.75000
Kilogs.

0.60000
Kilogs.

2.0924
Marks

CONTENTS

PART I — Expenditures of the Sino-Japanese War

CHAPTER PAGE

I Introduction 3

II Disbursements of the War 35

III Supply of War Funds 47

PART II — Economic Effects of
THE Sino-Japanese War

I Introduction 81

II Effects on Public Finance 87

III Effects on the Money Market 152

IV Effects on Industries 208

V Effects on Commerce 224

VI Effects on Transportation and Communication 254

VII Effects on Primitive Industry 273

VIII Social Effects 278

IX Conclusion 320

Index 325

XV

PART I

EXPENDITURES OF THE
SINO-JAPANESE WAR

Note. — In the tables throughout this volume, fractions of
yen greater than one half have been counted as a whole yen
and the other fractions have been disregarded.

CHAPTER I
INTRODUCTION

Causes of the War

W'hat the Balkan peninsula has so long been to Europe, the
peninsula of Korea has for centuries been to the Far East —
a "haunted palace" wherein lurked an unceasing source of
danger to the peace of the Orient. With a vast empire more
than four thousand years old as its immediate neighbor on
the one side and the indomitable Empire of Japan on the
other, it was not strange that the peninsula never gave birth
to a strong or independent nation, for it is scarcely possible
for small trees to flourish among giants of the forest.

With an area of some 75,000 square miles (almost as large
as Italy) and a population of about 12,000,000 (more than
that of Scandinavia) the country can not be regarded as
insignificantly small; yet, overshadowed as it was by two
great masculine powers on either side, it never evinced re-
markable virility or greatness. The comparative smallness
of the peninsula, however, has been the main reason why the
rulers of the land were unable to maintain undisturbed rela-
tions with their neighbors or establish a stable government.
Notwithstanding the fact that various monarchies arose in
the peninsula from time to time, each in turn assumed a char-
acter either of half-hearted independence or of meek sub-
ordination, ever at the mercy of its more powerful neighbors
whom it sought to humor by continual evasion, obsequious-
ness and adulation. No sacrifice of national honor or prestige
was too great for the maintenance of a mere existence. Indeed
it is scarcely too much to say that there never has existed any
really independent government in Korea, as the feeble and
fickle national entities of the peninsula have always wavered
in uncertain existence through the political upheavals and
changes constantly taking place on the Asiatic continent.
It was this continued political instability of Korea that ren-

3

4 EXPENDITURES OF THE SINO-JAPANESE WAR

dered the country a menace to the peace and welfare of Japan
and the whole of the Far East.

E\'en the Li dynasty, which five hundred years ago over-
threw the kingdom of Korai, was unable to prove more per-
manent than its predecessors, following along in the same path
of inconstancy and fluctuation. As its power declined from
year to year it resorted to every possible temporizing expe-
dient that suggested itself for the prolongation of its life.
Japan, while she showed sympathy and sought to help Korea
become a vigorous and independent power, free front disin-
tegrating disturbances, was helpless to effect reform, as she
always found her good offices ignored or treated with
discourtesy.

In spite of the repeated misdeeds and incivility of Korean
officialdom during the early part of the Meiji Era, Japan
persisted in her policy of leniency and willingness to forgive,
protecting the peninsula from aggression and leading all other
nations in recognizing its independence by signing a treaty to
that efi^ect in 1877. But notwithstanding these efforts for
peace and reform, the misguided officials of Korea gave this
all-important question no consideration, but, on the contrary,
devoted their time to internecine strife in following out their
petty ambitions for higher authority, often engaging in peril-
ous schemes for crushing their rivals. Thus, both the national
and international affairs of the country were left to go their
o\vn way.

All this time China had been regarding Korea as a depend-
ency of her own, and was interfering both directly and indi-
rectly in the internal affairs of the helpless country. It was
but natural, perhaps, that China should mistrust and dislike
Japan's paternal attitude toward Korea and try by every
means to prevent greater intimacy between them, a policy
which finally culminated in the uprisings of 1882 and 1884.
Each of these insurrections was due to a struggle for superi-
ority between the Conservatives and Progressives, the one
party siding with China and the other with Japan, time driv-
ing them farther and farther apart. Consequently after the

INTRODUCTION 5

disturbances of 1884, in order to prevent an unwelcome con-
flict with China, Japan concluded the Treaty of Tientsin,
which recognized and authorized equality of rights for both
Japan and China in the peninsula. Nevertheless, China
obstinately continued to regard Korea exclusively as her
own dependency, thus paying little or no attention to the
treaty. Having long maintained a footing in Korea, China
now assumed an aggressive and menacing attitude, contriving
so to complicate the situation as to render it intolerable to
Japan. Apparently it was China's policy to subject Japan
to insufferable pressure and leave her to take what course
she would, knowing that the island empire could not continue
to go on yielding step by step to the aggressor. Thus was
laid the egg from which was hatched the Sino- Japanese War.
Historically, of course, there should have been no ground
of conflict between Japan and China. Their relations from
the earliest days had been those of friendly neighbors, having
their common roots in similar doctrines as to government,
nature of civilization, law, art, literature, religion and moral-
ity. In former limes Japan had in many lines been a pupil
of China, imbibing the virtues of early Chinese civilization
which in ancient times was remarkably advanced. But with
the incessant expansion of European activity in the Orient,
Japan was well-nigh obliged to strike out for herself and soon
left China far behind. Japan labored earnestly for the intro-
duction of enlightened laws, form of government and mode
of living; whereby she soon grew into a nation far superior to
her former self and also to her big neighbor, from whom she
had once been content to learn. Meanwhile, China remained
unchanged, confined to the rut which she had trodden for
thousands of years. Already separated by a narrow sea, the
two nations now became separated by differences in civiliza-
tion and national policy, the one aspiring to enjoy the best
of western civilization, the other slumbering in antiquated
Asiatic conventionalism. Consequently, though Japan had
once regarded China as a great nation, she now could not but
consider her as stubbornly conservative, incapable, and even

6 EXPENDITURES OF THE SINO-JAPANESE WAR

moribund; while China, on her side, looked upon Japan with
contempt, as an upstart and a shallow imitator of western
barbarians — in fact, a mischievous and diminutive empire
that could accomplish nothing great. Thus estrangement
grew ever more pronounced as the two countries fell further
and further apart in thought and action, until at last the
inevitable open conflict was seen to be close at hand.

Moreover, the natural pride and mutual suspicion of the
two countries, of nearly equal strength, now tended to accen-
tuate mutual hatred and jealousy and each began to take
warning and prepare for a sudden rupture of relations. The
Loochoo and Formosan questions, discussion of which we
reserve for later treatment, would not have led to repeated
failure of negotiations, and finally to trouble, had China and
Japan been on friendly terms at the time. The unhappy
estrangement was then far advanced and ever growing wider
and deeper; and so, after the disturbances of 1882, Korea
became the principal cause of dispute between Japan and
China. The Togakuto affair only brought the trouble to a
head, and showed that at some time in the future Japan
would be forced to take up arms to settle her difficulties with
China, to ensure reform in Korea, and peace in the Orient.

As the fate of Japan was bound up with that of Korea she
could no longer endure the ever-increasing maladministration
and degradation of the hermit kingdom. In addition, China's
constant disregard of her treaty with Japan, especially after
the Togakuto difficulty, her treating Korea as still a Chinese
dependency, together with her attempts to intimidate Japan
to gratify her own caprices, rendered conflict inevitable.
Though Japan was well aware of the backward state of China,
she yet had no desire to come to blows with so great and
ancient a nation. Nothing but absolute necessity for the
defense of her own existence would ever have induced Japan
to take up arms against China.

In short, the Sino-Japanese War was a conflict between
two civilizations that had grown too dissimilar to exist longer
in harmony side by side; but the Korean question was its

INTRODUCTION 7

immediate cause; and it was specifically the means whereby
Japan sought to establish permanently her own independence
and the peace of the Far East. In Japan sympathy with
Korea was universal, coupled with a strong desire to check
the arrogance of China by a chivalric blow. Doubtless, as in
all wars, there were other contributory causes, for never in
the history of the world has any country gone to war and
undergone sacrifice of men and money merely for the sake of
another nation! Definite proof of this contention could be
advanced in examples beyond number. Japan's ultimate
action against China was not without good cause for it was
for the sake of her own existence and for Oriental peace.
Now, we shall proceed briefly to review the historical relations
between Japan and China, the immediate cause of the war,
the disbursements consequent upon the war, and the eco-
nomic effects of the war.

Historical Relations between Japan and China

The war between Japan and China brought to an end the
dispute as to Korea, driving the Chinese forces permanently
out of the peninsula; and furthermore it introduced Japan to
the outer world, assigning her a new position among the
powers. The war, moreover, exposed the weakness of China
and hastened the decline of her territorial integrity. Soon
afterwards she was compelled to submit to the German occu-
pation of Kiaochow, to lease Port Arthur to Russia, Weihai-
wei to the British and Kwangchow Bay to the French, all
sweeping changes which occurred immediately after the war.
Before that time there had been some aggression on the part
of Western Powers in China, such as the Opium War, the
Franco- British allies' capture of the Taku forts, and the
Sino-French War; but these were insignificant compared to
the inroads which took place after this war. Thus Japan
opened the eyes of European Powers to possibilities in the
Far East at a time when there was nothing in Europe to tempt
their lust for territorial expansion.

Historically, as well as geographically, the Korean peninsula

8 EXPENDITURES OF THE SINO-JAPANESE WAR

has been the bridge by which Japan has always sought access
to the continent of Asia; and at the same time she has always
regarded it as a barrier to assure her territorial safety. It is
clear from the pages of history that, as the unification of
the empire became more firmly established and population
expanded, the overflow ever sought relief in the direction of
Korea. Expeditions to Korea by the Emperor Sujin, the
Empress Jingo, Hideyoshi Taiko, as well as the argument for
Korean invasion in the early part of the Meiji Era, are vivid
experiences in the memory of Japan. In his history of Korea,
Dr. William Elliot Griflis well says that it is impossible to
discuss the history of the peninsula without taking Japan
into consideration, just as one can not deal with medieval
English history without including France. Having had so
intimate an historical relationship with that country, the
Japanese mind feels naturally both familiar with and friendly
toward the Korea of today. From the dawn of Japanese
history comes the tradition that Susano-no-Mikoto dispatched
his son Isotake-no-Mikoto to Korea to occupy and rule Soshi-
mori in the kingdom of Shiragi; and mythology suggests
that Okuninushi-no-Mikoto transported from Korea the ter-
ritory with which to extend the promontory of Kizuki in the
Izumo Province. As there is usually some substratum of fact
underlying tradition, we may infer that intercourse between
Japan and Korea has been intimate and unbroken from
earliest times. It would, therefore, seem but natural that
Japan' should occupy a part of Korea in establishing her
relations with the continent of Asia.

As to China's relations with Korea, it must be remembered
that that dynasty, as soon as it attained full power, invaded
and oppressed the peninsula without mercy. Modem intimate
relations between the two began about the year 1620, in the
reign of the Emperor Tai Tsung of the Chin dynasty, after
which time the Chinese practically exercised suzerainty over
Korea and extorted tribute from her; yet, shrewdly enough,
whenever any trouble arose over affairs in the peninsula,
China tried to escape all responsibility, even to the extent of

INTRODUCTION 9

denying her protectorate, while Korea in each case handed
all the profits to her overlord. Although China thus for-
mally denied her authority over the country, she never for a
moment abandoned it in fact; and, consequently, when the
trouble arose with Japan, the Chinese Government, having
already lost her reputation for diplomacy, had no recourse
but an appeal to arms.

The first trouble with foreigners came in 1865 when a French
missionary was assassinated. Prince Heung-Sun, father of
the then Emperor of Korea, better known as Tai-Wonkun,
cast over the government the shadow of his blind nationalism ;
and when a Russian ship visited Wonsan, requesting permis-
sion to trade with Korea, the Prince asked the French mis-
sionary Bellenue to request the foreign vessel to leave the port
at once. The missionary declined to interfere and the Prince,
suspecting him of being a European spy, had him beheaded.
When satisfaction was demanded by the French Legation at
Peking the Chinese authorities endeavored to evade responsi-
bility by replying that the peninsula was no longer a posses-
sion of China. In the following year, when the wreck of the
General Sherman and the massacre of her crew on the banks
of the Taidong River created international complications,
China again tried to shift the responsibility, answering that
she had no authority over Korea in matters relating to war
and peace. Yet two years afterwards, when Japan sent an
embassy to Korea for the purpose of acquainting the penin-
sular government with the Meiji Restoration and consequent
political changes and also to renew friendly relations, the
Koreans (being stirred up by China), suspected Japan's
motives, and treated the embassy with disdain. In 1872
Japan brought to an end the practice of sending a tribute-
bearing vessel from the Tsushima clan and proclaimed free
commercial intercourse, stationing an ofhcial at Fusan for
this purpose. But Prince Heung-Sun offered an unwarranted
official insult which created universal indignation in Japan,
where there arose a general demand for the chastisement of
Korea. In the following year Count Soejima was dispatched

10 EXPENDITURES OF THE SINO-JAPANESE WAR

to China to request explanation of the offense and to ascertain
definitely the exact relation between China and Korea; where-
upon the Chinese Government denied, as before, that it was
in any way responsible for Korea, saying that the peninsula
was in no sense a vassal state.

Although the Japanese Government and people endured
with remarkable patience the insults inflicted by Korea, the
latter country in no way amended her attitude; and in August,

1875, when Lieutenant Commander Ryoka Inouye, who had
been engaged in surveying operations on board the warship
Unyo, anchored off the island of Kanghwa near Seoul, he was
fired upon by the island forts. The Japanese ship replied
and destroyed the forts as well as killing 35 of the garrison.
Upon the affair being reported by the Commander to the
Japanese Government, Japan immediately dispatched her
men-of-war to Fusan, to protect the Japanese there. In

1876, an envoy was at once sent to demand satisfaction, the
mission including Kiyotaka Kuroda as chief and Kaoru
Inouye as vice minister. This embassy requested satisfac-
tory settlement of the Kanghwa question and the opening of
Korean ports to trade. Aritomo Yamagata, then Minister of
War, proceeded to Shimonoseki with troops so as to be ready
for any emergency. The repeated negotiations proved abor-
tive and the embassy was about to abandon its fruitless efforts
and return when suddenly Bokukeiju, a state councillor, and
Goko, an interpreter, revolted against Prince Heung-Sun and
insisted on opening the peninsula to trade, to which the
Korean Government finally assented; and on February 26,
1876, a letter of apology was offered for the Kanghwa Island
affair and a treaty of 12 articles signed, the main points of
which were that (i) Korea was to remain an independent
kingdom and enjoy relations with Japan on equal terms;
(2) that both countries should be ready to exchange envoys
at any time necessary; (3) that after 29 months Korea was
to open two ports to trade, Japan having leave to station con-
suls there; (4) that Japanese navigators were to have permis-
sion to survey Korean waters; and (5) that cases of trouble

INTRODUCTION II

among the nationals of either country residing in the two
open ports were to be settled by the officials of the nationals
concerned.

The treaty being duly signed the Japanese representatives
returned, and the Korean Government dispatched a special
envoy to Tokyo to strengthen the friendship with Japan,
while the latter created a legation in Seoul, sending Yoshikata
Hanabusa as Charge d'Affaires. In 1887 when the Korean
authorities attempted to expel all foreign missionaries, the
French Minister in Tokyo endeavored to have the Japanese
representative in Seoul mediate for the relief of the mission-
aries, and the Japanese Government opened negotiations in
the matter; but, discovering in the Korean reply phrases that
indicated Korean acknowledgment to being a tributary state
of China, Japan objected, and Korea reported the matter to
China. As the Chinese reply contained similar contentions,
Japan rejected that also. No further discussion was carried
on, as Japan's treaty with Korea had already settled the
matter of that country's independence.

Previous to this, in 1872, there had been trouble in Formosa,
w^hen some natives of ^liyako Island, Loochoo, who had been
cast ashore in Formosa, were murdered by the natives, the
same crime being repeated in the following year on men from
the prefecture of Oda. To avoid a repetition of such out-
rages, the Tokyo Government made Loochoo distinctly a
Japanese possession, instead of allowing its ruler to pay tribute
both to Japan and China as before, and dispatched Count
Soejima to China to carry on negotiations. Up to this time
about half of Formosa had been under Chinese rule, while the
rest was abandoned to anarchy. China, as usual, endeavored
to fight shy of responsibility, denying that she had any author-
ity over the island. But alarmed by the over\vhelming vic-
tory of the Japanese expedition to Formosa, invoking, as it
did, the surrender of numerous clan chiefs, China demanded
the withdrawal of the Japanese forces. Japan refused to
comply with the demand but after various negotiations agreed
to evacuate on condition that China recognize Japan's sov-

12 EXPENDITURES OF THE SINO-JAPANESE WAR

ereignty over the Loochoo Islands and pay an indemnity of
500,000 taels.

In consequence of the increasing influence of Japan in
Korea and the intimacy that now marked their relations
after the settlement of the Kanghwa affair, as well as on
account of Japan's firm attitude in regard to the Loochoo and
Formosan questions, China began to feel uneasy and wished
to check the further advance westward of Japan's influence.
To achieve this object with some appearance of tact, China
invited Occidental Powers into the peninsula, the United
States being the first to be so favored. She even dispatched
a warship of her own to bring over the American envoy, and
it is said that Li Hung Chang himself drew up the articles
signed by the United States and Korea. He, moreover,
informed Prince Heung-Sun that to form a treaty with West-
em Powers was the best way to ensure the safety of Korea.
Great Britain, Germany and other powers at once followed
the American example. Here we see clearly the change of
Chinese policy toward Korea. But notwithstanding all the
efforts of Li Hung Chang to carry out his plans secretly, there
was a sudden turn of affairs, which had its origin in the politi-
cal disorder that occurred in Seoul in 1882.

In accordance with the treaty of 1876, Korea opened the
port of Wonsan to trade in May, 1880, and proposed to open
Chemulpo, to which Japan had sent a surveyor, in July, 1882.
By this time Japanese influence was becoming dominant in
the Progressive party in Korea and a strong organization was
effected. In addition, important reforms were brought about
in the military system of Korea, and Lieutenant Hori of the
Imperial Japanese Army became instructor. The leaders of
the Progressives were Kim Ok Kiun, Hung Tiyong Ou and
Li Sai Ben, who had the sympathy and support of the leader
of the Mins. The Conservatives were led by Prince Heung-
Sun, who hated everything foreign and began an intrigue
against the Japanese and the Progressive party. The Mins,
who were members of the family of the Queen of Korea, had
for many years filled the highest offices of state. The Con-

INTRODUCTION 1 3

servatives now planned to drive out the Japanese, even if it
required force. The native soldiery were deprived of proper
rations until infuriated, and then were told all sorts of mali-
cious stories about the Japanese. On pretext of punishing Min
Ken Kwong, a member of the Min clan, for some slight offense
against army regulations, a furious mob gathered and began
to hunt the Japanese to death, and the legation was attacked.
The Japanese Minister, Hanabusa, with over twenty of his
fellow countrymen, fought his way out into the terrorized
streets of Seoul and escaped to Chemulpo, where he embarked
on a junk and was picked up by a British ship and taken to
Nagasaki. This outbreak took place on July 23, 1882.

Upon receiving the report of the Japanese Minister regard-
ing the affair, the government sent him back to Seoul on
August 20, to demand an explanation of the King. In the
meantime. Prince Heung-Sun had already assumed the reins
of government and on the minister's arrival showed no sign
of a conciliatory mood. The latter was, therefore, obliged to
withdraw to Chemulpo. Then Li Hung Chang, fearing that
Japan might either kidnap Prince Heung-Sun or dethrone the
King in some plot with the Prince, dispatched a body of troops
under Yuan Shi Kai, Bakeuchu and Teijosho to Korea, the
intention being professedly peaceful. Under pretext of
inviting Prince Heung-Sun to a friendly conference, the
Chinese laid hands on him and spirited him away to China.
On the Prince's departure, the scene changed in a flash. The
Progressive party assumed office and a treaty was signed
at Chemulpo on August 30, 1882. By this agreement the
Korean Government had to apologize to Japan, and to permit
the presence of Japanese troops in Seoul to protect the lega-
tion ; the cost of furnishing as well as of repairing the barracks
for the guard had to be borne by the Government of Korea.
Japan agreed to withdraw the guard after one year from the
signing of the agreement if she deemed it safe to do so. Other
clauses of the treaty provided for the opening to trade of
Wonsan, Fusan, and Chemulpo, etc., and the port of Yokai-
chin after a year, while the Japanese Minister and staff were

14 EXPENDITURES OF THE SINO-JAPANESE WAR

given permission to travel in the interior. It is significant
that at this time Japan again acknowledged the independence
of Korea, and consented to use in the treaty the date of the
Korean calendar, which was the four hundred and ninety-first
year from the founding of the dynasty. It was from that
date also that the Korean national flag began to be used.

The action of the Chinese in abducting a Korean prince
and detaining him at Tientsin could only be regarded as one
more proof of China's desire to treat Korea as a subject state.
From this time China endeavored by all means to associate
herself with the home affairs of Korea, which finally com-
pelled Japan to attempt to remove Chinese influence entirely
from the peninsula.

In January, 1883, the Japanese Government sent Shinichiro
Takezoe as resident minister to Korea, allowing him a legation
guard in accordance with the rights conceded in the treaty of
Chemulpo. At that time Yuan Shi Kai was also in Seoul,
backed by a considerable force, and was laboring assiduously,
through the efforts of Min, for the establishment of Chinese
influence throughout the peninsula, Min on his part aiming
at promoting his own personal interests with the assistance of
China. The Progressive party, being thus left in the lurch
by Min, looked to the Japanese Minister for sympathy and
waited for a favorable opportunity to strike an effective blow
at the Conservatives, who were then wavering considerably,
owing to China's trouble with France over the Annam bound-
ary question. On December 4, 1884, during an official dinner
in Seoul to celebrate the opening of the Postoffice, the oppor-
tunity was seized by Kin Gyoku Kin, Bokueiko, and others of
the Progressive party to attack Prince Min, who, together
with several of the ministers of the Conservative party, was
assassinated; they further endeavored to place the King's
palace under guard.

The King having requested protection, a Japanese force
under Minister Takezoe entered the palace and ensured safety.
The next day a cabinet representing the Progressive party
was formed, but at dawn on the succeeding day Yuan Shi

INTRODUCTION 1 5

Kai, assisted by the remnant of Min's followers, attacked the
palace. The Japanese force defended it, but in vain. They
finally had to retire to the legation, the King taking refuge
with the Chinese forces and a Conservative cabinet being
installed. That night the Japanese Legation was assaulted
and the minister, accompanied by his staff, together with
Kim and Hung, fled for their lives to Chemulpo, leaving the
legation in flames. The Japanese Government then dis-
patched Kaoru Inouye, Minister of Foreign Affairs, as pleni-
potentiary to Seoul for the settlement of the trouble. The
Treaty of Seoul was signed on January 9, 1885, requiring an
apology from Korea and the reconstruction of the legation
and barracks at Korea's expense.

Thus the affair was settled as far as Korea was concerned.
But China had still to be heard from; and for this purpose,
Prince Itom, then Marquis, was dispatched to Peking, where
he and Li Hung Chang drew up and signed the Treaty of
Tientsin, on April 18, 1885. The treaty made no reference to
the assault of the Chinese soldiery on the Japanese Legation
at Seoul, but acknowledged the equal rights of both nations
to send troops to Korea in case it should be necessary in the
future. The clauses of the treaty provided (i) that China
should withdraw all her troops from Korea, and Japan her
legation guards, the withdrawal to take place within four
months from the signing of the agreement, under pain of con-
flict. The Chinese troops were to withdraw by way of Mas-
ampo and the Japanese by way of Chemulpo. (2) Both
countries agreed further to advise the King of Korea to train
a modern army for the protection of the peninsula and the
maintenance of order therein, and to have him employ foreign
instructors for this purpose, neither country to send officers
to fill the positions. (3) In the third place, it was agreed in
the treaty that if in the future either Japan or China, or both,
should have occasion to dispatch troops to Korea, they should
open communication with each other as to the matter, and
that when the cause requiring the entry of troops no longer
existed, they were to be at once withdrawn from the country.

1 6 EXPENDITURES OF THE SINO- JAPANESE WAR

It was further stipulated that if any of the troops in Seoul
should be guilty of improper conduct China should punish
them on the production of indisputable evidence.

A general retrospect of the disturbance of 1884 shows that
the Progressives were defeated on account of their too impetu-
ous grasp of political power without sufficient forethought,
and that the Japanese Minister was also somewhat rash in
acceding too hastily to the King's request for protection,
since the monarch did not sincerely trust him, but on the con-
trary sought refuge under the flag of China. Moreover, the
minister took no immediate steps for the correction of the
Chinese soldiers when they assaulted the legation and slew
some of its guards. It was but natural, therefore, that
Japan's influence should gradually decline, while China's
continued to grow more and more throughout the peninsula.
The Conservative party soon became dominant, under the
Chinese Minister, Yuan Shi Kai. He brought his influence
constantly to bear on Korean diplomatic policy and the
Korean Government in turn was ever inclined to heed his
counsel. The whole situation became unfavorable for Japan,
and the general attitude of the people grew insolent and offen-
sive toward all Japanese residents, especially toward those
engaged in commerce and industry.

The most severe blow of the time to the Japanese was the
issue of the Bokokurei of 1889. In September the authorities
of Kankyodo suddenly prohibited the resale and export of
agricultural products without any previous notice to the
Japanese consul, in spite of the clause in the treaty requiring
such notice a month in advance. Although the same treaty
clearly stated the necessity of drought or riotous disorder as
the cause of such law, there was nothing of the kind. The
loss inflicted upon the Japanese was quite heavy. Japan
demanded the repeal of the measure and some indemnity,
but her demand was left unheeded until January, 1893. Kin
Gyoku Kin, the leader of the pro-Japanese faction, was assas-
sinated about that time, during a quarrel between the sailors
of a Chinese warship and some citizens of Nagasaki, and the

INTRODUCTION I7

Japanese Government had to make humiliating concessions
despite the fact that the fault was on the Chinese side. In
this manner conditions began to obtain derogatory to Japan's
interests.

The Korean Government brutally mutilated in public the
body of Kin and exhibited it with immense gusto all over the
country as an example of what should be the just fate of all
traitors. The victim was called "the most vicious traitor
Kin."

Just about this time (April, 1894) the revolutionary move-
ment of Tong Haks began to spread fiercely over the penin-
sula, more especially in the provinces of ChoUa and Chung-
Chong. Although the Tong Hak belief was quite a foolish
and superstitious one, supporters of the doctrine were found
in every province of the country. As the population had
long been suffering from the misrule of Min and were anx-
iously awaiting a change, they at once favored the Tong Hak
movement. The first definite outbreak occurred at Ko-Po
in the province of Cholla, where maladministration had been
particularly oppressive; and three provinces south of the
Kanko River unfurled the flag of insurrection. The Tong
Hak leader of this rebellious force in the south was Zempojun,
who repeatedly expelled the governmental force. Terrified
beyond measure by the situation, the Korean Government
sought the intervention of China through the mediation of
Yuan Shi Kai. As Japan was in the throes of political tur-
moil in the Imperial Diet at the time, China assumed that it
would not be easy for Japan to take much interest in foreign
complications. Under pretext of guarding a tributary nation
in her habitual manner, China sent troops into Korea, and
this action she made known on June 7 to the Tokyo Govern-
ment through her minister there. Japan at once denounced
China's pretensions to suzerainty in Korea, and, in accordance
with the treaty of Tientsin, informed China of her intention
to dispatch forces to guard her legation and interests in the
peninsula. Japan at once sent her troops from the 9th Army
Division under Major-General Oshima, which, on account of

1 8 EXPENDITURES OF THE SINO- JAPANESE WAR

their irregular composition, were known as the Mixed Brigade.
These troops marched into Seoul and Wonsan on June 13.

Previous to taking this action the Japanese Government,
in sympathy with her unfortunate neighbor and in the belief
that Korea's disorders would cause loss and have bad effects
on both Japan and China, as these three countries border on
each other so closely, had sent a friendly note to China, pro-
posing that the two powers should cooperate in bringing
about reforms in Korea, so as to avoid further complications
between Japan and China and thus maintain peace in the
Orient. China rejected the proposal, not deeming necessary
the measures suggested, and not wishing to interfere in the
internal affairs of Korea jointly with Japan. China insisted
on the withdrawal of the troops of the two powers, saying that
these were unnecessary, since the Tong Hak movement was
already pacified. Thus China continued to assert her suze-
rainty over Korea in various ways and dreamed of making
herself master of the Far East, while Japan continued as
positively to refuse to acknowledge this overlordship.

Notwithstanding her earlier consent to a reformation of
government under the guidance of Japan, when the latter was
determined to bring about such reform even without the help
of China, the Korean Government suddenly requested Japan
to withdraw her troops, the action having been taken at the
suggestion of China, who was always working behind the
scenes. On July 20, the Japanese Minister at Seoul dis-
patched the following proposal to the Korean Government :

1. In accordance with the Seoul Convention of 1885 Korea
shall at once reconstruct the barracks for the Japanese guard.

2. The Chinese forces now stationed in Korea under guise
of protecting her as a dependency shall be immediately with-
drawn, as Korea is an independent country.

3. If the foregoing proposals are not complied with by
the 22d instant, Japan will proceed to carry out reform in
Korea, even if she has to resort to force to accomplish it.

The Japanese authorities waited until the 23d; and as
the reply demanded was not forthcoming, the Japanese

INTRODUCTION 1 9

Minister overpowered the Korean guard, forcibly entered the
King's palace and had an audience with the monarch. The
King carefully explained the obstacles that had thus far
impeded reform, expressed gratitude for the interest Japan
took in the country, and pledged himself to an alliance w4th
Japan as against China for the reformation of Korea. On
the 26th the treaty with China, which acknowledged Korean
dependence of that country, was repealed and a decree was
issued requesting Japan to expel from the peninsula the
Chinese troops stationed at Asan.

While these proceedings wxre under w^ay in Seoul, China
was trying to smuggle her Asan troops aboard a chartered
English transport vessel and a Chinese warship, the Kow-
shing and the Tsao-Kiang. The Tsi-yuen and the Kwang-yt
of the Peiyang Squadron were to receive the two vessels and
were steaming boldly out of Asan Bay when they met the
Japanese warships Yoshino, Naniwa and Akitsushima, which
had been keeping vigilant watch near Phung Island. The
Japanese Government had not yet declared war, although her
men-of-war had been preventing the enemy's transportation
of troops, so the Japanese vessels patiently waited without
firing. But the Chinese ships made no formal signal to them,
and as the two fleets approached closer the Tsi-yuen sud-
denly opened fire on the Yoshino. Thus the Sino- Japanese
War began at Phung Island on July 25, 1894. With surpris-
ing swiftness the Japanese ships closed in upon the Kwang-yi
and put her out of action, forcing her into shallow water,
while the Tsi-yuen fled to Weihaiwei with many of her crew
killed. The Kow-shing was sunk and the Tsao-Kiang cap-
tured, so that victory was decisively on the Japanese side.

The Japanese troops invaded and conquered Songhwan on
the 29th, while the Chinese troops at Asan escaped without
exchanging a shot. On August i the Imperial Government
issued a declaration of war, in which Japan showed clearly
that China was deliberately taking aggressive measures with-
out considering the calamities and afflictions that would fol-
low in the Orient. The following is an extract:

20 EXPENDITURES OF THE SINO-JAPANESE WAR

Korea is an independent state. The country was first introduced to the comity
of nations on the advice of and under the guidance of Japan. It has, however,
been the habit of China to regard Korea as a dependency of her own, and both
openly and secretly to interfere in her affairs. At the time of the recent civil
disturbance in Korea, China dispatched troops thither, alleging the purpose to
be that of affording succor to a suzerain state. Japan, by virtue of the treaty
concluded with Korea in 1882, and looking to possible emergencies, caused a
militar>' force to be sent to that country. Desiring to procure for Korea freedom
from the calamity of perpetual disorders, and thereby to maintain the peace of
the Far East in general, Japan invited the cooperation of China to that end. But
China, advancing various pretexts, declined the proposal. Thereupon Japan
advised Korea to reform her administration so that she might be able to preserve
order and tranquillity within her borders, and to discharge the duties and respon-
sibilities of an independent state abroad. Korea had already consented to under-
take the task. But China secretly and insidiously endeavored to circumvent
and thwart Japan's purpose. Furthermore, she procrastinated and tried to make
warlike preparations by land and sea. Completing these preparations, she dis-
patched large reinforcements to Korea with a view to the forcible attainment of
her ambitious designs, and even carried her arbitrary attitude and insolence to
the extent of opening fire on Our ships in Korean waters. Plainly China's object
has been to render it uncertain where the responsibility for the preservation of
peace and order in Korea lies, and not only to weaken the position of that state in
the family of nations (a position obtained for Korea through the efforts of Japan)
but also to obscure the significance of the treaties recognizing and confirming that
position. Such conduct on the part of China is not only a direct injury to the
rights and interests of the Empire, but a menace to the permanent peace of East
Asia. From the action of China it can only be concluded that from the beginning
that country has been bent on sacrificing peace to the attainment of her sinister
object. Under these circumstances, ardent as is our wish to promote the prestige
of the country abroad by strictly peaceful means and methods, we find it impossi-
ble to avoid a formal declaration of war against China. It is Our earnest wish
that by the loyalty and valour of Our faithful subjects peace may soon be perma-
nently restored and that the glory of the empire may be augmented and ever
stainless.

Progress of the Sino-Japanese War

The historical facts with regard to the question of Korean
independence and the reformation of the government in that
country, so necessary to an understanding of the cause of the
war which began on July 25, 1894, have now been given in
outline. The struggle continued for eight months, during
which time Japan won a number of decisive victories one
after another and was soon ready to march upon the capital of
China. Whereupon the latter consented to peace by ceding
territory and paying an indemnity, while Korea was made

INTRODUCTION 21

independent of foreign interference, peace being restored on
April 17, 1895.

It will now be in order to give a brief review of the progress
of the war with China and to indicate the causes of the diplo-
matic troubles which arose after the war.

From the outbreak of the war to the battles of Ping-yafig and
the Yellow Sea

The battle of Phung Island on July 25, 1894, was prepara-
tory to the great campaign at Ping-yang and the decisive
battle of the Yellow Sea. The three Japanese warships, the
Yoshino, a cruiser of 4,267 tons, the Akitsushima, a cruiser of
3,150 tons, the Naniwa, a cruiser of 3,709 tons, forming the
First Flying Squadron under Rear Admiral Tsuboi, had been
guarding the west coast of Korea against Chinese transports
carrying troops to Korea. On July 25, when a Japanese
flying column consisting of the above ships appeared off
Phung Island, southwest of Chemulpo, the Chinese warships
Tsi-yuen, a cruiser of 2,355 tons and the Kwang-yi, a gunboat
which came from Chemulpo, came into view. As a state of
belligerency had not yet arisen the Japanese commander
naturally expected to meet the Chinese ships with the ordinary
formality, but to his great surprise the Tsi-yuen at once and
without warning opened fire on the Yoshino at 7.52 A. M., at a
range of about 3,000 meters. Consequently the admiral of
the Japanese fleet could do nothing but give orders to return
the fire. No sooner had the two assailants been put out of
action — the Tsi-yuen routed and the Kwang-yi driven ashore
— than two other Chinese ships, the Tsao-kiang and the Kow-
shing, a British boat, appeared, the latter transporting Chinese
troops bound for Asan. While the A kitsushima was capturing
the Tsao-kiang, the Naniwa ordered the Kow-shing to stop,
at 9.15 A. M., but the land force on the vessel compelled the
captain to continue the course back to Tako. The order to
stop and follow the Japanese vessel was repeated several times,
but, as the Kow-shing took no notice of it, the Naniwa pursued
and sank her at i P. M. The captain and others were rescued.

22 EXPENDITURES OF THE SINO-JAPANESE WAR

Another battle at Songhwan was fought on July 29. In
accordance with the request of the King of Korea on the
25th, the Japanese Minister Otori, at Seoul, at once sent for a
force from the brigade headquarters at Manriso to expel the
Chinese troops at Asan. The force proceeded to Soshajo,
some seventeen miles north of Asan and only about two miles
north of Songhwan, where the enemy had established them-
selves in a powerful stronghold. Songhwan is an important
town on the Asan road. The Japanese brigade captured the
place in short order while the troops at Asan fled without
offering resistance. The Japanese force participating in this
action consisted of four infantry battalions, one company
each of cavalry, artillery and engineers, 3,000 infantry, 47
cavalrymen and 8 guns. The Chinese had 8 guns, 3,400
men and a number of noncombatants. The enemy's killed
and wounded numbered 500, the result of 63 shells, 191 rounds
of shrapnel and 67,801 rounds of cartridges fired by Japanese,
while the latter lost 33 killed and 49 wounded.

It was after these two battles, one on land and the other on
sea, that the Imperial Proclamation of War was issued, namely
on August I, and the Imperial Army headquarters were on
September 13 moved to Hiroshima. The fact has already
been mentioned that prior to the outbreak of war the Imperial
Government endeavored to settle the dispute by peaceable
means, dispatching a mixed brigade from the Fifth Division
to Korea; but, seeing the hopelessness of such an attempt,
the government abandoned the idea with the report of the
battle of Phung Island on July 25.

According to reports reaching the Imperial Government the
number of Chinese troops in Korea, mostly around Ping-yang,
was more than 10,000 (including those that had fled from
Asan), and the Mixed Brigade at Seoul was rumored to be in
danger. For this reason the remainder of the Fifth Army
Division, namely, the divisional headquarters and the Tenth
Brigade, was ordered to Korea, on July 21, and on August
14 half of the Third Army Division, namely, the Fifth Bri-
gade, was moved. Landing at Fusan and Wonsan they at

INTRODUCTION 23

once marched on Seoul. Lieu tenant-General Michitsura
Nodzu, Commander-in-Chief of the Fifth Army Division, left
Ujina on August 4, reaching Fusan on the 6th and Seoul on
the 1 8th. The Japanese forces already in Korea — namely,
the Third and Fifth Army Divisions — were formed into the
First Army under General Yamagata, on September i, with
orders to drive the enemy out of Korea; but until the arrival
of General Yamagata the command was taken by Lieutenant-
General Nodzu, the Fifth Divisional Commander.

As to the Japanese forces already in the peninsula, the
Oshima Mixed Brigade was at Ryuzan and Rintsushin, the
Twelfth Regiment of the Tenth Brigade arrived at Wonsan
on August 8, and the Fifth Brigade was expected there on the
26th — the former called the Sakryong detachment and the
latter the Wonsan detachment. Half of the Tenth Brigade
was scheduled to be at Chemulpo on the 23d. Consider-
ing the dispositions of the troops at his disposal, Lieu tenant-
General Nodzu set September 15 as the day for the general
attack on Ping-yang. The Oshima Mixed Brigade was or-
dered to lead the attack, while the Sakryong and the Won-
san detachments were to descend from the north and the
Main Division from the southwest, the total attacking force
numbering 12,000 men and 44 mountain guns.

The Chinese force numbered 15,000 men with 29 mountain
guns, 4 field guns and 6 machine guns, protected by 27 forts,
15 on the south, 5 outside of Taidong gate, 4 on the north
hill without the wall and 3 on Mount Peony. The enemy
put up an exceedingly stiff defense, aided by the natural fast-
ness of the castled forts.

Against these fortresses and defense works the Japanese
troops fought arduously, and finally succeeded in routing the
enemy, the Sakryong and Wonsan detachments occupying
Mount Peony after making desperate attempts to storm it.
The stronghold fell on the i6th, the Japanese having lost 180
killed and 506 wounded, and having fired 680 common shells,
2,128 shrapnel and 284,869 rounds of ammunition. The
Chinese losses were 2,000 men, including General Tso-Paok-

24 EXPENDITURES OF THE SINO-JAPANESE WAR

wai, while 600 were taken prisoners. Thus in two days Japan
completely demolished China's foothold in Korea.

On sea the arms of Japan were also decisively victorious.
On September 12 the Japanese squadron got wind of the
presence of the Chinese squadron which was guarding trans-
ports near the Taidong and the Yalu Rivers, and on the 14th
the Main Squadron consisting of the Matsushima, the Chiyoda,
the FusOj the Itsuku-shima, the Hiyei and the Hashidate, with
the first Flying Squadron comprising the Yoshino, the Taka-
chiho, the Naniwa and the Akitsushima, the third Flying
Squadron comprising the Tsukushi, the Akagi, the Maya and
the Chokaij together with a torpedo flotilla including the
Kotaka, No. 22, No. 12 and the torpedo-depot-ship Yamas-
hiro, accompanied by the Kaimon, the Iwaki, the Amagi and
the auxiliary cruiser Saikyo, all proceeded toward Taidong
and arrived at the mouth of river on the 15th. But finding
no hostile ship there, the fleet left the Tsukushi, the Maya
and the Chokai as well as the torpedo flotilla, the Iwaki and
the Amagi at the river's mouth and set out northward. The
contending fleets met on the 17th off Tamushan, when a brisk
action of several hours ensued, lasting until dark. The Chinese
fleet consisted of the Ting-yuen and the Chen-yuen in the cen-
ter, followed by the King-yuen, the Sai-yuen, the Ping-yueriy
the Chih-yuen, the Lai-yuen, the Yang-wei, the Tsi-yuen, the
Chao-yung, the Kwang-chia, the Kwang-ping and three torpedo
boats, the total displacement being 34,420 tons with a speed
of from II to 18 knots. The Chinese had quick-firing guns,
70 below 30 c. m. and 9 below 12 c. m., as well as about 129
machine guns, and 31 torpedo tubes and two torpedo boats.
The Japanese squadron, with the exception of the Saikyo,
consisted of 11 ships representing 36,771 tons, with a speed
of from 13 to 22 knots, equipped with 246 guns, 44 below
33 c. m., 190 quick-firers below 15 c. m., 29 machine guns and
37 torpedo tubes. Thus the Japanese fleet was superior in
tonnage, speed and number of guns. Fighting with brilliant
dash and courage the Japanese succeeded in sending the
Chao-yung, the Chih-yuen and the King-yuen to the bottom,

INTRODUCTION 2$

while the Yang-wet was set on fire and the Kwang-chia blown
up, the rest of the enemy's fleet suffering great damage. The
Japanese lost not a single ship and had only 279 casualties.

The Chinese Peiyang Squadron was not completely de-
stroyed in this battle, but it was practically disabled and
deprived of fighting strength, without further power over
Korean or home waters. Japan, on the contrary, obtained
complete freedom of the seas, for transporting troops and
provisions to China without much fear of molestation. By
these two actions on land and sea China entirely lost her hold
on Korea, while Japan saw before her a clear path by way of
the province of Shingking to the capital of China. The progress
of the war having thus early taken such a favorable turn, the
spirits of the Japanese were correspondingly animated.

Parallel advance of the first and second armies and the sieges of
Haicheng and Port A rthur

The first army in Korea was now instructed by the Impe-
rial headquarters to expel all Chinese forces from Korea, and
to obtain full control of Kiuliencheng, Fenghuangcheng,
Haicheng and Liaoyang, and to form another army to take
possession of Port Arthur and Weihaiwei so as to prepare
for a decisive campaign in the territory of Liaotung with the
coming of the spring of the next year. In preparation for this
invasion of Chinese territory General Yamagata had been ap-
pointed commander-in-chief of the First Army Corps, so called
to distinguish it from the other at Pyenyang. General Oyama
was appointed commander-in-chief of the Second i\rmy Corps
on the day the welcome tidings of victory reached Imperial head-
quarters, and the two army corps were organized as follows :
First Army Corps

Commander-in-chief: General Count Yamagata
Third Provincial Division
Fifth Brigade

Sixth and Eighteenth Regiments
Sixth Brigade

Seventh and Nineteenth Regiments

26 EXPENDITURES OF THE SINO-JAPANESE WAR

Fifth Provincial Division
Ninth Brigade

Eleventh and Twenty-First Regiments
Tenth Brigade

Twelfth and Twenty-Second Regiments

Second Army Corps

Commander-in-chief: General Count Oyama
First Provincial Division
First Brigade

First and Fifteenth Regiments
Second Brigade

Second and Third Regiments
Sixth Provincial Division
Twelfth Mixed Brigade

Fourteenth and Twenty-Fourth Infantry Regi-
ments
Second Provincial Division (did not take part in battle
of Kinchow)
Third Brigade

Fourth and Sixteenth Regiments
Fourth Brigade

Fifth and Seventeenth Regiments
Special Besieging Corps (temporarily dismounted artil-
lery regiment)

Each provincial division included two infantry brigades,
one battalion each of cavalry, engineers, ammunitionists and
transport men, one regiment of field artillery, with field tele-
graph corps, stretcher-bearers, medical corps and communi-
cation equipment.

The Tenth Brigade of the First Army attacked and reduced
Wiju on the left bank of the Yalu River, completing their
task by October 17, while the Hooshan fortress fell on the
25th and on the 26th the Chinese abandoned Antung and
Kiuliencheng without combat, thus placing all Chinese de-
fenses along the Korean boundary in the hands of Japan.
Although the Chinese had at Kiuliencheng no less than 19,750

INTRODUCTION 27

troops, with 8i guns, to Japan's 13,000 infantry, 350 cavalry
and 78 guns, they were nevertheless so dispirited by the
defeat at Hooshan that they fled from the castle without
offering resistance. The Japanese casualties at Hooshan were
149; they fired 493 shells and 99,950 rounds of ammunition,
and captured 78 guns with 4,400 rifles.

After the fall of Kiuliencheng on October 26 the Japanese
forces divided into two, the Fifth Division marching on Feng-
huangcheng and the Third Division on Takushan, across the
Tatungkow. The enemy set fire to and evacuated Feng-
huangcheng on the 29th ; the Third Division captured Tatung-
kow on the 27th and Takushan on November 5, and on the
8th it came into direct communication with the Second Army
Corps. Advancing from Takushan, the Third Army Division
overwhelmed Yungancheng on November 18, fought an
important battle near Taohotsuon December 11 and cap-
tured Chaimucheng on the following day. The same force
reduced Haicheng on the 13th and thus opened the road
between Kaiping and Liaoyang. As the fall of Haicheng was
so vital to the Chinese, they made repeated counter attacks
for the recovery of the fort, a fierce battle ensuing on Decem-
ber 19 at Konwasai near this castle. The Japanese force
engaged numbered 3,960 with 30 guns, while the Chinese
numbered 9,200, with 6 field batteries protected by natural
strongholds. The battle lasted five hours, reddening the
fallen snow. After five bayonet charges the Japanese troops
forced the enemy to surrender, but only when on our side 69
had fallen and 339 been wounded. The number of shells
fired was 1,383 and rounds of ammunition 65,241. The suc-
cessive and decisive victories of the First Army Corps gave
greater freedom for activity and achievement to the Second
Army Corps.

To the Second Army Corps had been entrusted the reduc-
tion of Port Arthur, assisted by the First Army and the fleet.
Between October 24 and 26 the First Division succeeded in
safely landing at Huayuankow. Though Tatungkow and
Takushan had not fallen at that time their fate was too well

28 EXPENDITURES OF THE SINO-JAPANESE WAR

assured for much attention to be given them. Consequently,
the First Army was allowed to proceed with its mission alone,
and the First Army Division faced the stronghold of Port
Arthur. On the 6th the force captured Kinchow-ching on
the way, driving the enemy into the road to Port Arthur.
Most of the batteries near Talien Bay were silenced on the
7th by this First Division while the First and Second Armies
came into direct communication on the following day and
reached the point of attacking Port Arthur. With the fall of
the batteries around Talien Bay, the commander-in-chief of
the Second Army moved its disembarking headquarters from
Huayuankow to Talien Bay. The Mixed Twelfth Brigade,
landing at Huayuankow on November 7, was now brought to
the army, in preparation for a general assault upon Port
Arthur. On the 13th the number of the hostile garrison was
estimated at about 12,000, besides some at Poolanteen, at the
rear of the main fort ; but it was thought that the First Divi-
sion and the Mixed Brigade with the Special Besieging Corps
would be sufficient for the reduction, without seeking the aid
of the Second Division. The date of the attack was fixed for
November 2 1 .

Port Arthur was guarded on its eastern shore by Huang-
chinshan and attendant forts, with Mantonshan, 11 1 meters
high, and several other forts on the western shore, while
Sungshushan, 103 meters high, and Erhlungshan, 82 meters,
with Chihuanshan, 126 meters, and Itzushan, protected the
land approaches. Thus by these forts, a strong wall and
12,000 troops the fortress was well protected. Indeed the
place seemed almost impregnable.

The First Division of the attacking force was ordered to
assail forts Sungshushan and Itzushan, while the Mixed
Twelfth Brigade was given the task of reducing Erhlungshan
and Chihuanshan. After some sanguinary onsets Fort Itzu-
shan was captured at 7 A. M. on the 21st, then Sungshushan
and again Erhlungshan by 1 1.30 A. M. The defenses from the
rear having been thus reduced the First Division had no dif-
ficulty in taking Port Arthur in the afternoon. The shore

INTRODUCTION 29

fortresses of Huangchinshan and Mantoshan held out a little
longer, but by the late afternoon and following morning they
too had been silenced, and on the 22d the flag of the Rising
Sun floated over the battlements of Port Arthur.

The forces which accomplished this great achievement con-
sisted of 15 infantry battalions representing 59 companies, 3
squadrons of cavalry, 4 companies of sappers, 6 batteries
of artillery with 30 guns and 8 batteries of field artillery
with 48 guns; it was found that the Chinese participat-
ing were 9,500 on the land side with 18 pieces of heavy
artillery, 48 lighter guns and 19 machine guns, while on the
water front 3,200 men were engaged with the assistance of 58
heavy ordnance, 8 lighter guns and 5 machine guns, most of
the force finally escaping to Kinchow. The Japanese forces
suffered 288 casualties, firing 247 shells, 1,526 shrapnel and
179,562 rounds of ammunition.

Capture oj Weihaiwei, in vicinity of Yingkow and the
Pescadores

During the siege of Port Arthur the enemy made repeated
attacks upon Kinchow-ching, which was a Japanese supporting
point and guarded by only 3 infantry battalions and a section
of cavalry. The attacks upon the supply depot on the fol-
lowing day by the enemy that had fled from Port Arthur
were also successfully repelled and proved no obstacle to
the main siege. On the same day this repulse was made,
China intimated through the American Minister her desire
for the cessation of war.

A part of the First Division of the Second Army Corps
captured Poolanteen and Foochou on December 6, while the
First Brigade of the First Division took Kaiping on January
10, previous to which the Third Division of the First Army
had taken Haicheng, on December 13. Thus during the
first half of January, 1895, the Third Division of the First
Army Corps maintained full control of Haiching; and the
First Brigade of the Second Army Corps at Kaiping swept
the whole southeast area. As the Chinese forces were driven

30 EXPENDITURES OF THE SINO-JAPANESE WAR

back toward the line of Yingkow, Niuchwang and Tien-
chwangtai with Liaoyang at the right flank, they concentrated
their men along this line and on Haicheng and made three
furious attempts to regain it on January 17 and 22 and Feb-
ruary 16. A point had now been reached where the two
forces were face to face for the decisive issue.

The Imperial headquarters had organized a flying column
consisting of the Eleventh Brigade, being the Thirteenth and
Twenty-third Regiments, taken from the Second and Sixth
Provincial Division of the Second Army Corps, which together
with an artillery battery was dispatched on and after
January 10, for the purpose of landing at Yungching on
January 20 and attacking Weihaiwei, where the remnant of
the Peiyang Squadron had been taking refuge. Landing at
Yungching on the 20th, the forces at once faced about for
Motienling and Huanglinchi, the former an elevation east-
ward of the entrance to the bay of Weihaiwei, facing the
islands of Liukung and Jih. The force had four 24 c. m. guns,
besides 64 heavy guns under 24 c. m., which it placed on the
surrounding heights of Motienling ; it received vigorous assist-
ance from the Chinese fleet in the bay. The Japanese attack
lasted but four hours, however, when the fortress yielded, the
only remaining positions being the forts on the islands and in
Weihaiwei itself. Our forces swept all the fortresses around
the city of Weihaiwei on February 2, and by the 12th, as the
result of the joint action of the army and navy, every Chinese
ship in Weihaiwei had surrendered, and the Japanese forces
were complete masters of Weihaiwei.

The Chinese forces participating in this part of the cam-
paign numbered 12,000 troops, and 15 warships of the Peiyang
Squadron aggregating 30,250 tons. The warships were
transferred to Japanese command and the captured crews
were delivered under pledge as noncombatants. Having
accomplished its task so successfully most of the Japanese
force in Shangtung returned to the peninsula of Kinchow by
March i.

During the middle of February the Third Division of the

INTRODUCTION 3 1

First Army which had been left on guard at Haicheng, and
the Fifth Division of the First Army, which had been left at
Kiulicncheng, braved the freezing temperature and marched
north, capturing Anshantan on March 2 and Niuchwang on
the 4th. The First Division of the Second Army at Kinchow
also invaded Yingkow and took it on the 6th, and then these
detachments of the two army corps reunited and approached
Tienchwangtai.

The Japanese forces taking part in the siege of Tiench-
wangtai consisted of the First, Third and Fifth Army Divi-
sions, involving 21 infantry battalions, 6 companies of cav-
alry, 14 batteries of field artillery and 5 companies of engineers
with 54 field guns, 30 mountain batteries and 7 mortars. The
total force numbered more than 19,000. This was the largest
force participating in any single battle of the campaign on
the Japanese side. The attack opened on March 9 simul-
taneously from three directions, the Third Division occupying
the center, with the Fifth on the right and the First on the
left. The enemy numbered more than 20,000, with 40 guns,
and they put up an exceedingly stubborn defense. But it
was impossible to resist the terrific onset of the Japanese
forces from three sides, and the fort was taken on the very
day of the attack. After this defeat the Chinese lost all hope
of regaining Port Arthur, a hope which they had ardently
cherished since their first attack on Haicheng. The com-
bined operations of the First (Third and Fifth Divisions) and
Second (First Division) Army Corps were then completed for
the present and they began to plan a campaign in the direc-
tion of Chihli.

The Imperial headquarters in the meantime had already
planned for the occupation of the Pescadores, even before
the capture of Weihaiwei. For this purpose an expedition
southward was planned, and as soon as the enemy's fleet was
no more and Japan was master of the Gulf of Pechili, a mixed
column of 3 battalions and a mountain battery left Sasebo on
March 15, convoyed by the Southern Squadron, which had
been commissioned for the purpose, consisting of the Mat-

32 EXPENDITURES OF THE SINO-JAPANESE WAR

sushima, the Hashidate, the Itsukushima, the Chiyoda, the
YoshinOj the Naniwa, the Takachiho, the Akitsushima and
the Izuki. The islands were duly occupied.

Preparations for attack on Peking

It will be seen that Japan became master of the Gulf of
Pechili on September 17, 1894, as the result of the Yellow
Sea fight, and Port Arthur on November 22, and was in pos-
session of the whole territory east of the Liao River by March
9, 1895. The Peiyang Squadron was vanquished on Feb-
ruary 12, 1895, and Weihaiwei taken; and as the Pescadores
yielded on March 26, nothing remained to prevent Japan
from transporting her forces across the Gulf of Pechili. In
the early days of March the Imperial headquarters pro-
jected a campaign into the province of Chihli by reorganiz-
ing the various army corps already mentioned. The Second
Army Corps was to include the Imperial Guards, the Second,
the Fourth and Sixth Divisions, and it was to concentrate its
main efforts on the taking of Shanhaikwan. The First Army
Corps, including the First, Third and the Seventh Extraordi-
nary Divisions, was commanded to march into and occupy
the plains of Chihli. Thus the entire force consisted of seven
divisions with about one-third of the whole second reserve.
Although this force had to meet a Chinese army of more than
200,000 it nevertheless felt superior, as it doubtless was, in
comparison of numbers.

H. I. H. General Prince Komatsu, Chief of the General
Staff, was appointed commander-in-chief of the reorganized
army, and was to have left Ujina, a port near Hiroshima, on
April 13, establishing his headquarters at Shanghaiwan when
taken, and from there to promote the attack on Peking. All
such plans were then suddenly arrested by the arrival of pro-
posals of peace.

Reconciliation

The first suggestion of such a proposal came on November
22, the date of the attack on Port Arthur, but it ended fruit-

INTRODUCTION 33

lessly. China sent a representative to open negotiations on
January 31, 1895, but there being some defect in his commis-
sion, leaving him without full powers, no conference could be
held and he returned to Peking. On March 14 Li Hung
Chang came to Shimonoseki as the fully accredited repre-
sentative, and negotiations were opened on the 20th ; a treaty
of peace was signed on the 17th of April, the exchange of ratifi-
cations taking place on May 8. By this treaty China agreed
to recognize the independence of Korea, to cede Formosa, the
Pescadores and the Liaotung peninsula to Japan, to open the
ports of Shashih, Chungking, Soochow and Hangchow to
Japanese commerce and to pay to Japan an indemnity of
200,000,000 taels. Thus Japan's aim in opening the war was
attained and peace was restored in the Orient.

After Japan's occupation of the Formosan Island the natives
became more restive than before. Consequently the govern-
ment dispatched the Imperial Guards and the Fourth Divi-
sion, which carried out expeditions in various parts of the
island for the subjugation of the savages and of the rebellious
elements. This operation, however, need not be further
dwelt upon, since it formed no real part of the Sino- Japanese
War.

Unreasonable interference hy Russia, Germany and France:
political turmoil in the Far East

But scarcely had peace been restored when Japan had to
face and submit to partiality and injustice, on April 23, on
the part of Russia, Germany and France, in being obliged to
abandon the Liaotung peninsula, on the pretext that her
occupation of continental territory would be prejudicial to
the peace of the Orient. Japan had purchased it with the
tears and the blood of her sons, but she was compelled to
relinquish it for nothing. So potent a three-fold interference
she was not prepared to resist. By this action Japan was
humbled to the dust, a fact which it is well to note carefully.
The three powers contended that the peninsula under the
Japanese flag would prove a constant source of trouble in

34 EXPENDITURES OF THE SINO-JAPANESE WAR

East Asia. Japan yielded and abandoned the Liaotung pen-
insula on May lo and the three powers had their way. But
did matters remain as they had contended they would? They
ousted Japan and walked into her possessions themselves.
Germany leased by force the Bay of Kiaochow on March 6,
1898, Russia leased Port Arthur and Talien on March 27 of
the same year, and on June i Britain got Weihaiwei. France
could not be left out, and she got a treaty signed to lease
Kwangchow Bay on November 16 of the following year.
Thus the four powers, under pretext of leasing bases, started
the disintegration of China. It was indeed a shrewd and
ingenious means of snatching the prize which Japan had pur-
chased with her blood and was soon after forced to forswear.
In name it was an act of leasing; in reality it was an act of
occupation. We have no desire to misrepresent or to confuse
issues, but to state the simple truth as to the action of the
powers. It is the practical rather than the theoretical side
of the matter that Japan has to consider. She must be gov-
erned by facts, not by names. It was indeed something
Japan found, and still finds, impossible to understand: that
these powers should have compelled her to relinquish her new
possession and then have proceeded to occupy it themselves.

CHAPTER II
DISBURSEMENTS OF THE WAR

General Survey of Expenses

The Sino-Japanese War opened on July 25, 1894, when
Japanese warships were fired upon in the Hoto offing; and
peace was restored by the Treaty of Shimonoseki, signed on
April 17 of the next year. The space of war time extended
about nine months (including the Formosan expedition) . The
number of officers and men participating on the Japanese side
was more than 240,000, together with some 6,495 civil officials
and officers and some 100,000 laborers. The number of war-
ships engaged was 28, representing a displacement of over
57,600 tons, with 24 torpedo boats aggregating 1,475 tons.
The theater of operations extended about 268 miles east and
west, and some 1,269 rniles north and south, covering about
14,280 square miles of battleground in Manchuria, 18,445
square miles in Korea, 892J square miles in Shantung and
5,652^ square miles in Formosa, or about 39,270 square miles
in all. As it was an oversea war, the cost was comparatively
large. The total outlay has been put down at 235,866,055
yen, the period of disbursement running from 1894 to 1903,
as tabulated on the following page.

The actual total outlay for the war came to 233,523,252
yen, including the sum of 135,553 yen spent after 1903, which
will be accounted for later on. The total may be tabulated
under (i) War Office, 194,777,467 yen and (2) Naval Office,
38,745,785 yen.

Moreover, administrative expenses arising out of the war
increased the outlay by 2,478,354 yen, bringing the total up
to 236,001,606 yen, which will be analyzed according to dis-
bursements in due course.

35

36

EXPENDITURES OF THE SINO-JAPANESE WAR

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DISBURSEMENTS OF THE WAR

37

Cost of the War

The total amount of actual expense for the Sino-Japanese
War has been set down above at the figure of 233,523,256 yen,
which, as has already been stated, represents the outlay by
army and navy from June i, 1894, which was before the war
broke out, to March 31, 1896, together with certain further
disbursements after the war for readjustment of affairs en-
tailed by the war, compilation of war history and sundries.
The outlay in detail of the War and Navy Departments may
be seen from the following tables:

Expenditures of War Office, i 894-1 903*

Fiscal
years

Extraordinary

military

affairs

After-war
adjustments

Compilation
of war
history

Grant of
lump sum

Total

vovovovo oooooooooooo

Yen
164,520,371

20,415,279

5,915,563

3,025,960

22,136

4,795
67

Yen

56,548

35,766

19,560

9,836

Yen

50,540
50,695

42,593
31,810

43,845

Yen

125,197
82,486

123,689
37,108
28,070

Yen
164,520,371

20,415,279

5,915,563

3,025,960

254,421

173,742

185,909

78,754

71,915

Total...

193,904,171

121,710

219,483

396,550

194,641,914

» Between the years 1904 and 191 3 additional expenses in relation to the war were incurred as
follows: ,,

Yen

Compilation of War History and Statistics 61,430

Grant of lump sum 74.124

Total 135.554

When this outlay is added to the total outlined above, the grand total for the War Office will be
194.777.468 yen.

38 EXPENDITURES OF THE SINO-JAPANESE WAR

Expenditures of Naval Office, i 894-1 902

Fiscal
years

Extraordinary
war funds

Compilation of
war history

Lump sum
grant

Total

i894\

1895 i

1896

Yen
35,955,137

1,449,760
608,260

314,744
122,585

253,513
1,602 .

Yen
3,094

Yen

34,327

1,431

205

1,101

30

Yen
35,955,137
1,449,760
608,260

349,071

124,016

256,812

2,703

30

i8q7

1898

I 8qq

IQOO

IQOI

IQ02

Total

38,705,601

3,094

37,094

38,745,789

Analyzing the accounts of the War Office and the Naval
Office, the items include arms, ammunition, supplies for
troops and transportation of troops and provisions, as follows :

Details of Expenditures of War and Naval Offices

Items

War Office

Naval Office

Total

Arms and ammunition

Yen
32,603,214
91,979,606

41,371,365

27,949,985

873,297

Yen

31,850,170

3,980,079

1,308,760

1,566,588

40,188

Yen
64,453,384
95,959,685

42,680,125

29,516,573

913,485

Supplies for troops

Transportation of troops and pro-
visions

Accessories to cost of war

Miscellaneous expenses

Total

194,777,467

38,745,785

233,523,252

The above items, omitting those already explained, are fur-
ther analyzed in the tables on pages 39-42.

DISBURSEMENTS OF THE WAR

39

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40

EXPENDITURES OF THE SINO-JAPANESE WAR

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42

EXPENDITURES OF THE SINO-JAPANESE WAR

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disbursements of the war 43

Increase of Administrative Expenses Due to the War

As already mentioned, the total increase of administrative

expenses directly caused by the Sino- Japanese War was

2,478,354 yen, disbursed as follows:

Yen

Foreign Office 307.831

Home Office 414.564

Treasury Office i ,614,246

Judicial Office 764

Communications Office 140,949

Total 2,478,354

The above expenses were only a little over 10.5 per cent of
the total cost of the war ; and the items of expense in detail for
the above offices are tabulated on pages 44-46.

An extraordinary session of the Imperial Diet was con-
vened in October, 1894, at Hiroshima near the Imperial
headquarters, and extra rewards were given to contributors
to the war fund in money or materials and to those who
relieved distressed families of soldiers at the front.

44

EXPENDITURES OF THE SINO-JAPANESE WAR
Expenses of Foreign Office

Items

1894

1895

Total

Travelincr exoenses

Yen

18,981
8,432
7,174

3,240

11,125

1,461
194,065

Yen

6,927

6,013

12,941

2,016

23.472

1,550

3,455
6,979

Yen
25.908
14.445
20,115

5.256

34.597

1.550

4,916
201,044

Miscellaneous

Dispatch of police to Korea . . .

Allowance to diplomats and

consuls in Korea

Reconstruction of legation in
Korea

Repairing annex to legation in
Korea

Reception of Chinese peace
envoy

Miscellaneous

Total

244,478

63,353

307.831

Expenses of Legations and Consulates

Names of legations and
consulates

Fiscal year
1894

Fiscal year
1895

Total

Foreign office and legations
abroad

Yen

218,645

1,016

13,140

35

1,297

160

2,075
2,028

3,551

2,131

402

Yen
21,918

27,040

641
1,506

5,588

6,124

535

Yen

240,563
1,016

Legation in China. . . ...

Legation in Korea

40.180

Consulate at Hongkong

Consulate at Tientsin

Consulate at Chef 00

35

1,297

160

Consulate at Shanghai

Consulate at Fusan

2,716
3,534
9,139
8,255
937

Consulate at Chemulpo

Consulate at Seoul

Consulate at Gensan

Total

244,480

63,352

307,832

Expenses of Home Office

Special

Session

Imperial

Diet

Korean affairs

Extra
rewards

Year

Home
Office

Metropoli-
tan Police
Office

Prefec-
tures

Hokkaido

Total

1894

1895

1897

1898

994

4,475
16,954

122,051
50,176

16,434
27,300

4,105

139,226
32,848

148,059
94,430

139,226
32,848

Total . .

994

21,429

172,227

43.734

4,105

172,074

414.563

DISBURSEMENTS OF THE WAR
Treasury Office"

45

Items

Fiscal
year
1894

Fiscal
year
1895

Fiscal
year
1896

Fiscal
year
1897

Total

Extraordinary war expenditures (auditing

Yen

Yen
11.969

Yen
11,687

Yen
12,241

Yen
38.897

Korean affairs:
(A) Cabinet

Dispatches to Imperial head-

14.022
931

4.S79
4.099
5.3SI

414

2,422
852
350

29.350

4.792
1.683
1,690

I. ISO

12,812
5.058

2,258

1.241

1.378

242

6,175

18.814
1.683
2 62 X

Dispatches to Korea . .

(B) Treasury Office

Dispatches to Imperial head-

S.729
16.911
10.409

2.672

3.663

2.230

592

35.525

Dispatches to Korea ,

Dispatches to China and Korea .
(C) Dispatch of Privy Council to Impe-

(D) Dispatch to the front of auditors of
Public accounts

(E) Prize Court

(F) Higher prize court

(G) Manufacturing of military and com-

mandeering tickets

Total

62,370

38.479

100,849

War pensions

349.779

349.779

Extraordinary session of the Imperial Diet:
Upper House

22,412
25.794

....

22,41a
25.794

Total

48,206

48.206

Furnishing of temporary Diet building:

12,729
12,386

....

....

12,729
12,386

Lower House

Total

25.115

25. IIS

Rewards:

(A) Manufacturing of extra decorations

and decoration oertificate

(B) Manufacturing of extra prize cups .

28.348

286.399

65.876
36.073

157.134

380,623
193.207

Total

28,348

286,399

101,949

157.134

573.830

Managing allowance extra war funds

76,121

2.504

78.62s

Manufacturing of public loan bonds

18,104

319.597

45.665

2.890

386.256

Grand total

182,143

1,082,345

162.301

174.769

1.601,558

Expenses of manufacturing public loan

....

....

....

b 12.688

» The expenditure of the Treasury Office in relation to the war was 1,614,246 yen, which sum in-
cluded all expenses concerning the business of the Treasury Office and also some other expenses
which were legally but nominally attached to the Treasury Office.

Expenditure after the fiscal year of 1898 was for rewards and the making of prize cups, amounting
to 12,335.94 yen, and for printing public loan bonds in the same year: 314.80 yen, the following year:
35.50 yen, and in 1900: 2.25 yen.

*> For the two fiscal years 1899 and 1900.

Judicial Office

Yen

Fiscal year 1 895 763

46 EXPENDITURES OF THE SINO-JAPANESE WAR

Communications Office*

Communications office.

Administrative office of light houses.

Tokyo post and telegraph office .

Osaka "

Nagasaki

Hiroshima

Nagoya

Kumamoto

Total

Yen

90,523

41,415

2,094

2,985

4

2,337

837

754

140,949

» The outlay by the Communications Office during 1894 amounted to 140,949 yen, which repre-
sented the increased expenses caused by the war, fractions of yen being omitted.

CHAPTER III

SUPPLY OF WAR FUNDS

The expenses of the Sino-Japanese War, as already out-
lined, were about 235,000,000 yen in all; and of this sum the
administrative outlay was mostly defrayed from reserve funds
and surplus in the Treasury ; but the amount expended on the
war being very large, the sources thereof are hereafter de-
scribed in detail.

The budget of revenue and expenditure relating to the
expenses of the Sino-Japanese War, legally known as "extra
war funds," was 250,000,000 yen; and the resources were
mostly public loans and surplus funds in the Treasury, as well
as a special account fund, but not from taxes. This was the
beginning of war loans in Japan.

Before entering upon a description of the main source of

supply for war funds, it may be well to describe the budget

and total accounts relating to the "special account for war

purposes."

Revenue

First section, war funds . . . .
First subsection, war funds.

Budget

Yen
25,000,000
25,000,000

Fixed amount
as receipt

Yen
225,230,128
225,230,128

Amount
received

Yen
225,230,128
225,230,128

Expenditures

Budget

Mixed sum by
Imperial
sanction

Payment
ordered

First section, war funds

First subsection, war funds ....

Yen
25,000,000
25,000,000

Yen
210,973.697
210,973,697

Yen
200,475,508
200,475,508

Of the expenditures above mentioned, the amount trans-
ferred to General Budget Account was 9,037,494 yen, the

47

48 EXPENDITURES OF THE SINO-JAPANESE WAR

unused portion of budget was 40,486,998 yen, and the unused
portion of sum allowed by Imperial sanction was i ,460,698 yen.
The total fixed sum of the above revenue stood as follows
(details of expenditures to be given later) :

Yen

Treasury Office 219,361,977

War Office 5,093»9i7

Naval Office 774,234

225,230,128

The detailed items are as follows:

Yen

First section, war funds 225,230,128

First subsection, war funds: Yen

Raising of public loan (Treasury Office) 1 16,804,927

Transfer of the surplus fund of Treasury (Treasury

Office) 23,439,087

Contributed w^r funds (Treasury Office) 160,800

Contributed relief fund to War Office 2,210,650

Contributed relief fund to Naval Office 578,090

Miscellaneous receipts: Yen

War Office 1,323,162

Naval Office 196,143

I,5i9,,305

Receipts from occupied territory (War Office) 624,425

Receipts from Formosa and Pescadores Islands . . . 935,68o

Transfers to Special Account (Treasury Office) .... 78,957,165

225,230,128

As stated above, the extra war funds amounted to such an
immense sum, that it was necessary to make arrangement for
a special account, separated from general revenue and ex-
penditure. In October, 1894, by Law No. 24 the "Special
Account for War Purposes Act" was promulgated, as follows:

Article I. Finances for the extra war funds in regard to the
affair with China and Korea shall be classified and adjusted
separately from general revenue and expenditure.

Article II. All revenue and expenditure for extra war
funds from June i, 1894, until the termination of the war shall
be regarded as included in one financial year.

The above articles were based on Article XXX of the law
of accounts, according to Law No. 4 of 1889, which says that
"in case it is difficult to follow the provisions of the present
law on account of special requirements, a special mode of pro-
cedure may be allowed, but such special mode of treatment

SUPPLY OF WAR FUNDS 49

must be effected by law." Therefore the expenditure allowed
by this special law of finance was limited to war funds re-
quired by the War Office and the Naval Office. This special
account was wound up at the end of March, 1896, in accord-
ance with the first article of Law No. 10 of the same year
relating to the special account for war purposes. Since then
all expenditure incurred by the War Office and the Naval
Office for extra war outlay was included in the general budget
accounts.

Vote for war expenses

Extra expenses for the carrying on of Korean affairs were
to be defrayed from the second reserve fund in the fiscal year
1894 (the amount being 950,000 yen, that is to say, $473,100).
This second reserve depends upon the 69th article of the
Constitution of Japan which reads as follows: "In order to
supply deficiencies, which are unavoidable, in the budget, and
to meet requirements unprovided for in the same, a reserve
fund shall be provided in the budget." Article 7 of "the
law of Finance" explicitly states that "the second reserve
shall be used to meet necessary expenses unprovided for in
the budget." At the same time, articles 16 and 17 of the
Rule of Finance regulates its transaction and process. How-
ever, the cost proved so enormous that the second reserv^e was
insufficient. Thereupon in June it was decided by Imperial
sanction to utilize for war expenses a surplus of 26,000,000
yen in the Treasury, 3,000,000 yen of which, as may be seen
from details already given, was a loan to the Korean Govern-
ment. As the Chinese forces in Korea could not be put
down by the troops of the Fifth Division, after the battles
fought on July 25 and 29, at Phung Island and Songhwan
respectively, mobilization took place, and the Imperial
Declaration of War was issued on August i, after which the
Third Division w^as dispatched to the front and the First
Army Corps organized, thus extending the sphere of operations
and increasing the outlay beyond the resources of the sur-
plus in the Treasury.

50 EXPENDITURES OF THE SINO-JAPANESE WAR

On August 15, 1894, Urgent Imperial Ordinance No. 143
was issued, in conformity with Article LXX of the Imperial
Constitution, for the purpose of raising war funds, which
provided for the transfer of funds included under special
accounts, borrowing from banks or the raising of a public
loan as an urgent measure. On the same day, by Imperial
Ordinance No. 144, war loan regulations were issued, and it
was decided to incur a debt of 50,000,000 yen with interest at
6 per cent or under per annum, the first portion raised being
the sum of 30,000,000 yen.

On September 15, the Imperial headquarters were removed
to Hiroshima; and on the 22d an extra session of the Imperial
Diet was convened at the same place, which asked for a war
budget of 150,000,000 yen, a bill being passed authorizing the
flotation of a public loan of 100,000,000 yen at less than 6
per cent per annum. The mode of flotation, terms of issue
and period of redemption and others were entrusted to the
Minister of Finance.

Out of the total sum of 150,000,000 yen asked for, 59,996,-
885 yen had already been spent in urgent necessity, by Impe-
rial sanction, beginning with June, 1894; ^^d consequently,
approval of this action was asked for at the special session of
the Diet, in accordance with Article LXIV of the Imperial
Constitution. It was a time when the nation's patriotism and
public indignation had reached a state of high tension and no
hesitation was had in giving approval to the necessary outlay
for the war, the sums spent by Imperial sanction and the war
loan being voted for with enthusiasm; and the war budget
was promulgated on October 23, 1894. Moreover, at the
eighth session of the Imperial Diet in February, 1895, the
Lower House passed the following resolution with regard to
war expenses :

With respect to the issue of an Imperial Rescript for the subjugation of China we
deem it proper to say that we think the attainment of the object of the war and the
avengement of the nation's honor still a great way off; and therefore it is hereby
resolved that further disbursement of war expenses shall be approved to any limit
required.

SUPPLY OF WAR FUNDS 5I

During 1894 and 1895 the war was at its height and peace
nowhere in sight, so that 96,290,000 yen out of the 150,000,000
yen approved by the Diet was spent by Imperial sanction in the
eight months from June to January, 1896; and with an outlay
of about 11,000,000 yen a month for army and navy, the
balance of the sum voted by the Diet could scarcely suffice to
June, 1895. The government estimated that the sum of at
least 100,000,000 yen would be required from July to Decem-
ber, 1895, and framed a supplementary budget accordingly.
The measure was submitted to the Lower House on February
20 and authority for the raising of further war loans was given
by both houses within a week, the supplementary war budget
being issued on March 2, 1895.

Disbursements

The main resource for war funds was public loans and
special contributions to war funds, special contributions for
relief of army and navy men, transfers from surplus in the
Treasury and from special account funds. The surplus from
receipts and disbursements of the Treasury was deposited in
the Bank of Japan either as a fixed or current account at
reasonable interest, in accordance with Law No. 16, in June,
1894, at the beginning of the war; and disbursements from
this account naturally caused an increase in the bank note
issue, which was further accentuated by a government loan
from the Bank of Japan and the transfer of the special account
fund to the war fund. Thus the expenses of the war were
covered by floating of loans and by increasing the issue of
bank notes.

Monthly receipts for the Special Account for War Purposes
were as follows : ^

^ Table does not in some parts correspond to the monthly receipt of war funds
which will be described later, because it represents the sum received by the revenue
officers, while the other was the sum paid into the cash office.

Before the setting aside of a special account for war purposes, the allotted amount
for war funds from the general account was paid out in the first month from the
surplus in the Treasury — 26,000,000 y^n — ^and the public loan and contributed
relief funds are described in the following table according to the months they were
actually received by the revenue officer.

52

EXPENDITURES OF THE SINO-JAPANESE WAR

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SUPPLY OF WAR FUNDS

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54 EXPENDITURES OF THE SINO-JAPANESE WAR

The methods of raising war funds may be classified as
follows:

Private Subscriptions to Public Loans and War Funds

Date

1894

July.

August. . .
September
October. .
November
December.

1895
January. .
February .
March . . .

April

May

June

July

August. . .
September
October. .
November
December .

1896
January. .
February .
March . . .

April

May

June

July

August. . .
September
October. .
November
December .

Total .

Public
loan

Yen

2,500,000

500,000

5,241,000

7,241,300

2,795,000

6,480,100

9,645,900

10,032,400

13,297,200

10,721,700

9,120,000

88,490

26,310

322,860

1,051,170

2,749,989

25,861,135

843,865

1,652,000

1,438,000

1,015,000

2,163,000

679,500

942,000

405,808

116,804,926

233,618,653

Contributed
to war
funds

Yen

[00,000

60,800

160,800

321,600

Contributed

to relief fund

of army and

navy

Yen

5.836
175,238

347,444
420,371

254,546
276,854

280,688

321,011

324,163

166,792

106,095

26,046

22,136

14,262

24,676

9,604

4,782

3,478

964

1,066

1,011

205

307

29

53

964

121

2,788,741

5,577,483

Total

Yen
5,836

175,238
2,847,444

920,371
5,595,546
7,578,954

3,075,688

6,801,111

9,970,063

10,199,192

13,403,295

10,747,746

9,142,136

102,752

50,986

332,464

1,055,952

2,753,467

964

1,066

25,862,146

844,070

1,652,307

1,438,029

1,015,053

2,163,964

679,621

942,000

405,808

119,754.467

239,517.736

SUPPLY OF WAR FUNDS

55

War Expenses Met by Increasing the Issue of Bank Notes of Bank

OF Japan •

Date

1894

June

July

September
October. .
November
December .

1895
January . .
February .
March . . .
April . . . . ,

May

June

July

August . . .
September
October. .
November
December .

1896
January. .
February .
March . . .
April ....

May

June

July

August . . .
September
October. .
November

Total .

Surplus of
Treasury

Yen
26,000.000

439.086

3.000.000

23.439,086

Miscellaneous
receipts

Yen

1.806
10.566

83.202

5.04s

11,361

II. 216

19.670

32.743

146,969

50,293

99.514

15.502

183.959

272,832

126,330
63.242
53.077
51.703
54.070
81,711

102.406

1.163

20,237

19,008

1,679

Borrowed

from Bank

of Japan

Yen

6,000,000
12,500,000
19,530.000

18,420,000
22,530,000
20,500,000
17,500,000
14,000,000
12,500.000
12,500,000
12,500,000
18,390,000
25,000,000
33,100,000
41,500,000

42,500
41.270
37,900
41,240

000
000
000

Transfers

from
Treasury

Yen

2.553.377
8,814,025
7.970,645

16.724,798
16,048,649
22,368,991
25,077.224
24.195.419
22,661.037
20,727,592
26,748.677
29,080,730
32,412,194
31,534.497
28,710,373

34.930,525
41.773.061
26,710,462
16,107,780
3,102,036

1.519,304 449.380,000 438,252,092 78,957.165

Transfers
from spe-
cial ac-
count fund

Yen

9,020,000
52,020,000
4,280,956
7,665,676
4.613,948
1.356,585

War scrip
issued

Yen

3,780,000
3,780,000
3,780,000
3,780,000
3,304.269
2,752,821
1.886,816
1.293,606
861.769
820,168

404.713
104
104
104
104

26,444,578

a The sum borrowed from the Bank of Japan, the transfers from the Treasury and the issuing of
war scrip were temporary measures to meet deficits, and after April i, 1896. these were redeemed
by public loan and by transfer of special account fund, which accounts for some items being du-
plicated.

The revenue from occupied territory amounted to 624,425
yen, or about $310,964, which, on account of having been
levied after March, 1896, is not scheduled above.

The monthly receipt of war funds stood as shown in the
table at the top of next page, but in case the amount of
revenue should not correspond to the above tables reference
had better be made to the former.

As previously described, the amount of revenue for war
funds does not always correspond to payment for war ex-
penses; and such being the case, whenever a deficit would have
occurred, money was borrowed from the Bank of Japan, or

56 EXPENDITURES OF THE SINO-JAPANESE WAR

Monthly Revenue and Expenditures, i 894-1 896

Date

1894
June 6-July 30.

August

September

October

November

December ,

1895

January

February

March

April

May

June

July

August

September

October

November

December

1896

January

February

March

April-N ovember

Total

Revenue

Yen
26.000,000

3,395,565
6,579,153
7.588,052

3,161,151
6,805.365

6,992,033
10,201,408
13,422,961
10,780,339

9,289,459

152^984
151,841

346,675
1,239,680
3,026,534

127,291

64,316

26,548.278

89.357,043

225,230,128

Expenditures

War Office Naval Office Total

Yen

4,789,377

5,945,497

7,970,252

11,988,463

12,931,275

10,999,451

9,262,790
8,550,979
13,696,459
7,974,876
7,953,360
6,215,641
5,651,285
4,357,157
6,683,723
8,406,199
6,940,476
6,980,463

6,096,322

4,742,457

7,351,521

976,652'

[64,520,371

Yen

474,606
1,705,441
1,795,013
3,271,294
6,408,527
2,775,220

1,542,514
1,688,237
1,365,916
1,934,765
1,087,796
1,530,316
1,228,999
1,265,465
824,167
1,288,730
1,089,670
1,580,345

835,667

529,785
764,158
968,509

35955,140

Yen

5,272,982

7,650,937
9,765,265

15,259.757
19,339,801

13,774.671

10,805,304
10,239,216
15,062,375
9,909,641
9.041,156
7.745.957
6,880,283
5,622,622
7,507,890
9,694,929
8,030,146
8,560,809

6,931.989
5,272,242

8,115.679
8,143*

200,475,508

•After April, 1896, revenue is not tabulated by the month, since it was an adjustment account
after the end of the fiscal year; but these amounts show that the fixed sum of refunding exceeds that
of payment.

appropriated from surplus in the Treasury, or by the isfeue of
war scrip; and these temporary measures were repaid after
April 1 , 1 896, by raising public loans and the transfer of the
special account fund, which transactions will be described
hereafter.

In regard to the above, the government used bank notes
and copper coins as far as possible to meet extra expenses, and
thus prevented a diminution of specie as well as the danger of
a financial panic. The total amount paid out for war from
June, 1894, to the end of March, 1896, was 200,483,651 yen,
the following currency being employed :

SUPPLY OF WAR FUNDS
Currency Expended for War Purposes, i 894-1 896

57

Amount

Percentage

Yen

183,981,744

91.8

11,651,482

5-8

2,601,028

13

300,000

0.2

850,000

0.4

1,099,293

0.5

104

200,483,651

100. 0

Bank notes and copper coin

Silver dollars

Subsidiary silver coins

Silver bullion

Mexican dollars

Sycees

War scrip

Total

\Mth regard to war scrip, it may be necessary to say some-
thing as to how it was used. Had bank notes been used in the
theater of war, the paper currency would accordingly have had
to be increased and in consequence there might have been a
considerable withdrawal of specie. To avoid this, war notes
of 1.5 and 10 taels, as well as of 5 sen, 2 sen, and one-half sen,
were issued. It was found, however, that to circulate both
war notes and bank notes in the same region was inconvenient
for transactions ; and so when the Japanese forces were about
to invade the province of Chihli they were provided with war
notes to the face value of 3,780,000 yen, equal to 2,700,000
taels, for use in that region. Peace was so soon restored, how-
ever, that it was found that only 103.60 yen of the war scrip
had been used. The supply of war funds has already been
outlined in a very general way, but each item in detail will be
given later on.

Expenditure of the Surplus in the Treasury and the
Temporary Making Up of Deficits

The budget for army and na\y outlay during the war with
China was calculated at the sum of 250,000,000 yen, for the
greater part of which the government had to depend on public
loans, the surplus in the Treasury for the fiscal year of 1893,
the transfer of indemnity and other sources of income being
comparatively of minor importance, as showTi in the following
table:

58 EXPENDITURES OF THE SINO-JAPANESE WAR

Yen Percentage

Treasury surplus, fiscal year 1893 23,439,086 10.4

Public loans 116,804,926 51 .9

Transfer of indemnity 78,957.165 35.0

Other receipts 6,028,950 2.7

Total 225,230,127 100. o

Although the surplus in the Treasury could be used im-
mediately at the outset of the war, the public loan turned in
4,326,108 yen in monthly average from September, 1894, to
November, 1896; and the transfer of indemnity was carried
out after April, 1896. So that during this time revenue and
expenditure did not often correspond, which will be explained
later.

Before the Sino-Japanese War, the annual accounts showed
a yearly surplus, owing to the negative policy, and the actual
results for five years before the war stood as follows:

Fiscal year Yen

1889 16,974,307

1890 24,343,951

1891 19,675,597

1892 24,727,171

1893 29,187,509

Total 114,908,535

The surplus of the fiscal year 1893 was 29,187,508 yen;
and 5,748,422 yen of this sum was transferred to the next fiscal
year, so that 23,439,086 yen was transferred to the war fund,
which facilitated our war movement. Although at the out-
break of war two or three special accounts were added to the
surplus of 23,439,086 yen described above, so that it amounted
to some 26,000,000 yen as war fund (including 439,086 yen
added in November), 3,000,000 yen out of the amount were
loaned to the Korean Government. Therefore it was in the
end the same as mentioned at first. And although the war
expenses were defrayed by the transfer of the surplus in the
Treasury, from the outbreak of war to September, in a short
time there was a deficit.

SUPPLY OF WAR FUNDS 59

Monthly Receipts and Disbursements, i 894-1 896

1894
June 6-July 31 . .

August

September

October

November

December

1895

January

February

March

April

May

June

July

August

September

October

November

December

1896

January

February

March

April-November *

Total

Receipts

Yen
26,000,000

3,395,565
6,579,153
7,588,052

3,161,151

6,805,365

6,992,033

10,201,408

13,422,961

10,780,339

9,289,459

152,984

151,841

346,675

1,239,680

3,026,534

127,291

64,316

26,548,278

89,357,043

225,230,128

Disbursements

Yen

5,272,982

7,650,937
9,765,265

15,259,757
19,339,801
13,774,671

10,805,304
10,239,216
15,062,375
9,909,641
9,041,156

7,745,957
6,880,283
5,622,622
7,507,890
9,694,929
8,030,146
8,560,809

6,931,989
5,272,242
8,115,680
8,143''

200,475,508

» After April, 1896, accounts were not reckoned by the month, as it was an adjustment account
after the end of the fiscal year.

t Fixed sum of refunding exceeded that of payment.

From June, 1894, to May, 1896, the highest total shortage
was 83,043,165 yen, which occurred in February, 1896, to
meet which transfers were at once made from the Treasury,
or loans were had from the Bank of Japan, or else war scrip
was issued to make temporary adjustment. The following
table will indicate the details of the making up of temporary
deficits. Although the sum borrowed from the Bank of
Japan will be described later, it is added here for the sake of
convenience :

6o EXPENDITURES OF THE SINO-JAPANESE WAR

Means of Meeting Deficits in War Fund, 1894-1896'

Date

1894

June

July

August. . .
September
October. .
November
December

1895
January. .
February .
March . . .

April

May

June

July

August. . .
September
October. .
November
December

1896
January. .
February .
March. . .
April . . . . .
May

Total

Total
deficits in
war fund

Yen

8,553.377
21,314,025
27,500,645

35,144,798
38,578,649
46,648,991
46,357,224

41,975,419
38,941,037
36,531,861
42,001,498

49,357,547
58,705,800
65,496,266
71,030,541

77,835,239
83,043,165
64,610,566
57,347,884
3,102,138

Transfers

from
Treasury

Yen

2,553,377
8,814,025
7,970,645

16,724,798
16,048,649
22,368,991
25,077,224
24,195,419
22,661,037
20,727,592
26,748,677
29,080,730
32,412,194

31,534,497
28,710,373

34,930,525
41,773,061
26,710,462
16,107,780
3,102,036

914,076,670 438,252,092 449,380,000

Temporary loan

from Bank of

Japan

Yen

6,000,000
12,500,000
19,530,000

18,420,000
22,530,000
20,500,000
17,500,000
14,000,000
12,500,000
12,500,000
12,500,000
18,390,000
25,000,000
33,100,000
41,500,000

42,500,000
41,270,000
37,900,000
41,240,000

Amount of

war scrip

issued

Yen

3,780,000
3,780,000
3,780,000
3,780,000
3,304,269
2,752,821
1,886,817
1,293,606
861,769
820,168

404,714
104
104
104
102

26,444,578

» After June, 1896, there was no further shortage.

SUPPLY OF WAR FUNDS

6i

Ratio of Means of Meeting Deficits in War Fund, i 894-1 896

Date

1894
October. .
November
December .

1895
January. .
February .
March . . .
April . . . . ,

May

June

July

August. . .
September
October. .
November
December .

1896
January. .
February .
March. . .
April ....
May

Transfers

from
Treasury

29.9
41.4
29.0

47.6
41.6
48.0
54- 1
57-6
58.2
56.7
63-7
58.9
55-2
48.1
40.4

44 9
503
41-3
28.1

[GOO

Loans from
Bank of
Japan

70.1
58.6
71.0

Issue of war
scrip

8.1
8.1

0.5

As may be seen from the above, the temporary deficit was
met by transfers from the Treasury and loans from the Bank
of Japan. So much then for the summary of war finance.

Issue of Public Loans

The public loan floated to cover the expenses of the war
with China-and affairs in Korea was named the "War Loan,"
and the sum of legal issue anticipated was in all about 230,-
000,000 yen; but only 124,920,000 yen was put on the market,
as may be seen from the statements on pages 62-63.

A necessary disposition of finance with regard to Korean
affairs was promulgated by Imperial Emergency Ordinance
No. 143 on August 14, 1894, ^-s follows: "The government is
authorized to float a public loan for the purpose of meeting
the expenses of Korean affairs." War loan regulations were
then promulgated by Imperial Ordinance No. 144 on August

62

EXPENDITURES OF THE SINO-JAPANESE WAR

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SUPPLY OF WAR FUNDS

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64 EXPENDITURES OF THE SINO-JAPANESE WAR

15, 1894, when it was decided to float a public loan by in-
stalments to the limit of 50,000,000 yen. This was the
beginning of war loans in Japan.

The war loan regulations fixed only the amount of the
subscription, the period of redemption, the rate of interest and
the time of payment. All other details of the loan were to be
based on the consolidated public loan regulations by Imperial
Ordinance No. 66 of October 16, 1886; and the war loan
regulations were as follows:

War loan regulations

Article i. War loans shall be floated gradually to the limit of
50,000,000 yen by Imperial Ordinance No. 143.

Art. 2. The interest on the loan shall be less than 6 per cent per
annum, and shall be paid twice yearly, in the month of June and
December, until the redemption of the principal.

Art. 3. The principal shall be redeemed within fifty years from
the sixth year after issue.

Art. 4. The subscriptions to the loans, the amount of issue, the
price, rate of interest, the period of subscription, the number of
times of instalment for subscription and other details shall be fixed
by the Minister of Finance.

Art. 5. The delivery of public loan bonds, prescriptions in regard
to payment of principal and interest, the management of bonds, and
all other details not fixed by this regulation shall be arranged ac-
cording to the Consolidated Public Loan Regulations promulgated
by Imperial Ordinance No. 66 of the year 1886.

The subscriptions received on the above basis comprised
the first war loan; and the method of subscription was an-
nounced by Notification No. 32 issued by the Treasury De-
partment on August 17, 1894, the amount called for being,
as already explained, 30,000,000 yen. They were issued at
par and the security money was to be 10 per cent of the face
value, the security to be transferred to the first payment, and
the rest to be paid up in seven instalments from November 16,
1894, to the end of June, 1895.

SUPPLY OF WAR FUNDS 65

Method of Payment for Bonds of First War Loan

Payments

1 894- 1 895

Yen

First

to September 20
October 16-31
November 16-30
February 16-28
March 16-31
April 16-30
May 16-31
June 16-30

I0»

Second

10

Third

10

Fourth

10

Fifth

10

Sixth

10

Seventh

20

Eighth

10

» Transferred from security.

The first war loan happened to be placed on the market at
a time when money in both Osaka and Tokyo was showing
the customary stringency of the season, and the daily in-
terest fixed by the Tokyo Bankers' Club was 2 sen, 8.4 rin,
or 10.022 per cent, and loans from the Bank of Japan were
then 2 sen, 20. rin, or 8.03 per cent. The daily discount rate
of securities payable in Tokyo was 2 sen, i rin, which is
equal to 7.665 per cent, while the daily rate of discount of
securities payable in another place was 2 sen, 3 rin, or 8.395
per cent. The minimum and maximum of interest in Tokyo
and Osaka at that time was as follows:

Interest Charges in Tokyo and Osaka

Classification of

Tokyo

Osaka

amount loaned

Months

on security

Highest

Lowest

Average

Highest

Lowest

Average

Yen

Per

Per

Per

Per

Per

Per

cent

cent

cent

cent

cent

cent

loo-iooo

Aug.

1. 127

0.959

I 034

I 351

1.132

1. 241

Sept.

1 .107

0.971

1.056

1.250

1 .010

1 .122

1,000-10,000. . . .

Aug.

1.076

0.923

1.003

1.278

I 059

1. 132

Sept.

1. 051

0.934

1.003

1. 163

0.961

1.059

Above 10,000 . . .

Aug.

0.987

0.882

0.926

1. 241

I 059

1. 132

Sept.

0.981

0.875

0 934

1. 165

1 .009

1 .090

The market price of 5 per cent national bonds depreciated
as follows:

66

EXPENDITURES OF THE SINO-JAPANESE WAR
Depreciation of 5 per cent National Bonds

Date

Loans

Kinroku

Naval

Consolidated

August, 1894

September, 1894

Yen

100.38

99 57

Yen
95 90
99 56

Yen
100.49
100.21

To undertake the flotation of a pubic loan for so large a
sum as 30,000,000 yen was without precedent in Japan. Con-
sequently the government, and the public as well, regarded
the outcome with some misgiving. But fortunately the
loyalty and patriotism of the nation overcame all difficulties
and the subscriptions amounted to no less than 77,002,650
yen, the highest bid per hundred of face value being 142.44
yen, while other bids were 125 and 120 yen. The authorities
therefore decided to accept applications for subscriptions
above par to the extent of 11,627,850 yen, and at par to the
amount of 18,372,150, or 30,000,000 yen in all.

The sum of actual receipts amounted to 30,063,372 yen, but
as there were a few applicants who did not take up the amount
applied for and forfeited their deposit money the total was
thus affected, yet the amount subscribed was thereby reduced
by only 2,200 yen, while the reduction in the actual receipts
was no more than 1,855 3^^^- This signal success was ob-
tained through the people's patriotism and public indignation.

The second loan, which was issued in accordance with Law
No. 25 of October 23, 1894, was put on the market in Novem-
ber, 1894. The law reads as follows: ** In order to defray the
war expenses in connection with China and Korea the govern-
ment is hereby authorized to raise a public loan gradually at
less than 6 per cent interest; and the necessary details, such as
methods, agreements, subscriptions and period of redemption,
shall be fixed by the Minister of Finance."

On November 22, 1894, by Departmental Order No. 19,
the Treasury floated a loan of 50,000,000 yen at 5 per cent
interest, the notice concerning subscriptions being based on

SUPPLY OF WAR FUNDS

67

Departmental Order No. 40, issued on the 22d of the same
month by the Treasury. The loan was issued at 95 per 100
yen of face value, the security money to be transferred to
subscription as first payment, and the balance to be paid up in
six instalments from January 16, 1895, to the end of June of
the same year. The period of application for subscription
was limited to four days only, from December 11 to 15,
other details being the same as in the case of the first loan.
The instalments were to be paid up at the following rate per
hundred yen of face value :

Method of Payment for Bonds of Second War Loan

Payments

I 894-1 895

Yen

First

to December 25
January 16-31
February 16-28
March 16-31
April 16-30
May 16-31
June 16-30

10*

Second

10

Third

10

Fourth

10

Fifth

20

Sixth

I'.

Seventh

» Transferred from security.

Applications for subscriptions amounted to 90,301,300 yen,
being 40,301,300 yen in excess of the issue called for. The
highest bid was 120 yen. The government then decided to
accept, first, applications for subscriptions above par to the
amount of 22,119,850 yen, and, next, from among applicants
at less than par, but more than 95 per 100 yen, the sum of
7,924,000 yen; and 19,955,150 yen from among applicants at
par, making 50,000,000 in all.

As it was about the end of the year, the money market was
somewhat tight, and the market price of the national bonds
tended toward depreciation. Nevertheless the outcome was
successful beyond expectation. This was due largely to the
strength of the government's financial credit and the inherent
economic power as well as to the patriotic feelings of the people.

The third loan was issued according to Law No. 8 of March
2, 1895, which says: "In order to meet expenses in regard to
the war with China the government is hereby authorized to
float by degrees a public loan to the limit of 100,000,000 yen

68

EXPENDITURES OF THE SINO-JAPANESE WAR

at interest of less than 6 per cent ; and the necessary details as
to price, method of flotation, agreement and period of subscrip-
tion and redemption shall be left to the Minister of Firtance."

On March 4, 1896, in accordance with Order No. 2 of
the Treasury Department it was decided to call for a loan of
10,000,000 yen at 5 per cent interest; and in accordance with
Announcement No. 13 issued by the Treasury, the date of
payment for subscriptions was to be from April 1 6 to the end
of October, 1896, in seven instalments, the period for applica-
tions to be from March 16 to 21, all other details to be the
same as in the first issue.

The rate of payment for instalments was as follows:

Method of Payment for Bonds of Third War Loan

Payments

1896

Yen

First

to March 31,
April 16-30
May 16-31
June 16-30
July 16-31
August 17-31
September 16-30
October 16-31

10*

Second

10

Third

20

Fourth

Fifth

Sixth

10

10

20

Seventh

Eighth

10
10

" Transferred from security.

As the war was now over and the nation busily engaged in
post-bellum enterprises, many hopeful undertakings were being
started and the money market was showing considerable
stringency. Consequently the amount subscribed was only
i>578»050 yen, the highest bid being 103, the applications
above par reaching 1,026,850 yen and those at par 551,200.
Therefore to make up the deficiency, 5,000,000 yen was trans-
ferred from the indemnity account, and the Bank of Japan
advanced the sum of 3,420,000 yen on these bonds.

The general features of each of the loans having been out-
lined above, the loans may be tabulated as on pages 69-70.

During the periods of subscription for the first and second
loans the war was in progress, and news of victory was con-
stantly in the air, but no one of course knew as yet just what
would be the final outcome. Yet it was quite evident that
the nation was being worked up to a high state of excitement

SUPPLY OF WAR FUNDS

69

m

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70

EXPENDITURES OF THE SINO-JAPANESE WAR

OOQOOOQQ

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SUPPLY OF WAR FUNDS 7 1

and indignation, and liberal contributions for the relief of
soldiers as well as many other patriotic works were under-
taken, with the result that the loan was popular beyond all
expectation, especially as compared with loans raised in time
of peace. Even the very poor who could not be expected to
have more than would keep them, applied for subscriptions
out of their small savings and by dint of the most careful
frugality. Accordingly, the number of subscribers to the
first loan was 119,015; to the second loan, 173,051; and the
average sum subscribed for in the first loan was 647 yen;
and in the second loan, 521 yen. The difference was, there-
fore, as far apart as heaven and earth as compared with loans
issued in time of peace, the average then being 3,005 yen per
subscriber.

On account of the number of applications from small sub-
scribers being so numerous there were naturally some deferred
payments, the interest on which amounted to 7,313.71 yen for
the three issues. Moreover, the regulations concerning con-
solidated bonds required that applications which were not
paid up should become invalid and the security money for-
feited together with the amounts paid up. For this reason
the fixed amount subscribed was slightly reduced. This being
the case, the actual sum of the war bonds issued was 89,996,-
500 yen in all. The actual sum of receipts was still further
modified by interest on deferred payments, the account being
as sho\\Ti in the table on page 72.^

The public loans heretofore described were issued directly
to the public by so-called general subscription. At the same
time a war loan of 35,000,000 yen was subscribed for by
extraordinary special issue based upon Article VI, paragraph

^ By regulations of consolidated bonds the paid up sums of those failing to com-
plete their payments were forfeited; and, in this way, of the first issue 20 yen of
security money and 90 yen of the first instalment was forfeited, 190 yen of the
second instalment and 45 yen of the third instalment. In the second issue 65 yen
among subscribers to the first instalment, 50 yen of the second, 60 yen of the third,
60 yen of the fourth, and 30 yen of the fifth instalment, were forfeited.

The difference between par and above par price which was paid up in the first
issue was 12.80 yen and 4.04 yen in the second. However, in the first, as there was
a case in which only the security money was paid and not 0.30 yen of the difference
mentioned previously, a fractional sum of 0.30 yen did not go into the actual receipt.

72 EXPENDITURES OF THE SINO-JAPANESE WAR

Receipts from War Loans

First issue

Second issue

Third issue

Total

Subscription:

Amount issued

" deferred

Yen
30,000,000
2,200

Yen
50,000,000
1,300

Yen
10,000,000

Yen
90,000,000
3.500

Total

29,997,800

30,065,227
1.855

49,998,700

47,639,822
970

10,000,000
10,001,258

89,996,500

87,706,307
2,825

Receipts:

Amount received

deferred

Total

30,063,372
3.134

47.638,852
4.044

10,001,258
134

87,703,482
7.312

Amount received:

Interest on deferred
payments

Total

30,066,506

47,642,896

10,001,392

87.710,794

2, of the amendment to the regulations with regard to con-
soHdated bonds, promulgated by virtue of Imperial Ordinance
No. 46, issued on June 16, 1888, which declares that "the
Minister of Finance is authorized to issue bonds after the
price of the Consolidated Loan bonds is fixed, in accordance
with the current market price, without having recourse to
general subscriptions, the bonds to be delivered to the Bank of
Japan; but the amount and the price of the bonds so issued
must be published by the Minister of Finance on the day after
issue."

In regard to the above it may be said that the Minister of
Finance fixes the price of such bonds as he may think proper,
in accordance with the market price of the bonds of the same
kind which he has issued before.

One of the extraordinary special loans was based upon
Imperial Ordinance No. 137, of October 1895 which says:
"The grant of a lump sum may be had from the Treasury for
war purposes by delivering bonds at par to the Bank of
Japan who will deliver them to purchasers according to con-
venience, no transaction to be for less than 50 yen.'' This
loan was issued in instalments at 5 per cent interest to the

SUPPLY OF WAR FUNDS 73

limit of 10,000,000 yen, which was part of the 100,000,000 yen
loan previously arranged to be issued in conformity with Law
No. 25 of October 23, 1894, known as the Kosho Lx)an, based
on Order No. 3 of the Treasury Department, October 4, 1895.

As the said loan was to be issued in place of a grant from
the Treasury, either the War or the Naval Office applied to
the Bank of Japan as necessity required, and the bank applied
to the Minister of Finance, who then issued in accordance
with the second clause of article 6 of the Consolidated Bond
Regulations and delivered the bonds to the Bank of Japan,
and the bank paid the money into the Treasury. Moreover,
as to certain parts of the war budget up to March, 1896, it
was known as an extraordinary account, as both the War and
the Naval Office decided to purchase the bonds above named.
The total amount of issue was 9,924,250 yen; and the amount
of actual receipts was 9,734,205.15 yen, being 9,132,756 yen for
the War Office, and 791,500 for the Naval Office. But in
regard to the purchase the special account for war purposes
amounted to 4,102,394.50 yen and the amount not issued was
75»750 yen.

Another extraordinary special issue, being the fourth loan,
was for 25,000,000 yen in face value of bonds issued, taken up
by employing funds from the Deposits Section of the Treasury..
The details with regard to the loan are given on page 74.

Loans

The loans for extraordinary war expenses were based on
Imperial Emergency Ordinance No. 143, issued on August 13,
1894, which says: ''In order to meet the expenses of Korean
affairs the government is hereby authorized to borrow money,
as an urgent measure, from the Bank of Japan." Although
this power was not used at the time, it authorized the govern-
ment to make up a temporary shortage by borrowing from the
central bank to help out the war funds. Again, by virtue of
Law No. 25 issued on October 23, 1894, ^^e government
floated a public loan to the limit of 100,000,000 yen at less
than 6 per cent interest, at the same time borrowing money

74 EXPENDITURES OF THE SINO-JAPANESE WAR

Fourth War Loan

Issues

Date

Amount of
issue

Price

Amount actu-
ally issued

1895

Yen

Yen

Yen

Third

Oct. 16

90,000

100.50

90,450

"

Oct. 25

150,000

100.20

150,300

"

Oct. 30

40,000

10030

40,120

"

?r^^- ^l

30,000

100.30

30,090

<(

Nov. 8

400,000

100.30

401,200

"

Nov. 14

50,000

100.70

50,350

"

Nov. 19

262,500

lOI.IO

265,388

"

Nov. 28

328,000

101.90

334,232

"

Dec. 9

60,000

102.60

61,560

ti

Dec. 13

250,000

102.50

250,250

n

Dec. 25

2,037,000

101.50

2,067,555

tl

Dec. 27

350,000

101.40

354,900

1896

l<

Apr. 2

50,000

98.90

49,450

"

Apr. 6

30,000

98.90

29,670

"

June 29

500,000

100.20

501,000

"

Sept. 26

300,000

98.70

296,100

"

Dec. 16

500,000

98.36

491,800

1897

"

Feb. 26

300,000

9949

298,470

<(

Mar. 3

600,000

99.04

594,240

11

Mar. 26

400,000

99.14

396,560

It

Oct. 14

600,000

95.83

574,980

n

Dec. 21
1898

1 ,000,000

93.15

931,500

It

Feb. 7

45,000

93.48

42,066

**

Mar. 12

1 ,200,000

91.32

1,095,840

"

Mar. 30

3,000

89.94

2,698

n

Oct. 24

48,000

92.51

44,405

<<

Dec. 28

57,750

92.98

53,696

1899

<<

Mar. 15

28,000

95.84

26,751

"

Mar. 28

130,000

94.81

123,253

l<

Oct. 13

20,000

95.8

19,096

1900

"

Mar. 27

60,000

92.84

55,704

"

Sept. 28

3,000

90.71

2,721

Oct. 15

2,000

90.51

1,810

Total

9,924.250

9,728,205

Fourth

Mar. 4,
1896

25,000,000

100.00

25,000,000

Total

34,924,250

34,728,205

SUPPLY OF WAR FUNDS

75

from the Bank of Japan, the amount being used for extraor-
dinary war expenses. By virtue of Law No. 8 of March 2,
1895, the government borrowed money under the same
conditions as above. A loan of 20,500,000 yen was raised by
authority of Law No. 25 and a loan of 20,260,000 yen on Law
No. 8, the total being 40,760,000 yen, but there was no loan
caused by urgent measure.

The above loans were fixed and issued by contract papers
stating the amount of the loan, or by special orders delivered
as necessity required. It was after the example of the tem-
porary Loan Law No. 16 of February 20, 1894, which authorized
borrowing from the Bank of Japan at reasonable interest to
make up temporary deficits within any one fiscal year. There
were two methods of obtaining the money : one by fixed loan
and the other by current loan. The fixed loan is at a fixed
rate of interest, the amount of the loan and terms of redemp-
tion being arranged by contract paper or by command of the
Minister of Finance. The current loan, on the other hand, is
raised on security of money forwarded from the treasuries at
different places in the Empire to the central cash office in
Tokyo or the branch cash office in Osaka, the interest for the
loan being the same as the daily rate for overdrafts in the
Bank of Japan. The loan referred to in this paragraph was a
fixed loan.

The details of the loans based on Laws No. 25, 1894, ^^^
No. 8, 1895, are as follows:

Loan Based on Law No. 25, 1894

Date of issue

Amount

Annual rate
of interest

Date of
redemption

Nov. 15, 1894

Yen
8,000,000
1,500,000
3,000,000
3,000,000
2,000,000
3,000,000

Per cent
5
5
5
5
5
5

Mar. 31, 1895

Nov. 26, 1894

Dec. 10, 1894

i<

Dec. IS, 1804

<i

Feb. I, 1895

<<

Feb. 6,1895

<<

Total

20,500,000

76 EXPENDITURES OF THE SINO-JAPANESE WAR

Loan Based on Law No. 8, 1895

Date of issue

Amount

Annual rate
of interest

Date of
redemption

Nov. 14. i8qs

Yen
2,000,000
1 ,000,000
1 ,500,000
1 ,000,000
1,000,000
1 ,000,000
1 ,000,000
1 ,000,000
2,000,000
1 ,000,000
1 ,000,000
1 ,000,000
1,000,000
760,000
500,000
1,000,000
1 ,000,000
1,500,000

Per cent
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6

Dec. 31, 1895

Dec. 2. i8qs

Dec. '?. i8qs

Dec. 0. 1 80s

Dec. 12, 1895

Dec. 18, 1895

Dec. 2S. i8qs

Dec. 26, 1895

Dec. 28, 1895

Jan. 22, 1896 .

Mar. 31, 1896

Jan. 28, 1896

Mar. 5, 1896

Mar. 27, 1896

Mar. 31, 1896

Mar. 31, 1896

"a

June 30, 1896

Apr. I, 1896

Apr. I, 1896

Apr. 6, 1896

Total

20,260,000

» Date of redemption prolonged to June 30, 1896, by order of the Minister of Finance.

As already described, the above loan for extraordinary war
expenses was a temporary measure, and in accordance with
the receipts of the war loan was to be redeemed gradually.
Although March 31, 1895, was the date set for redemption of
the 20,500,000 yen loan raised by Law No. 25 in 1894, the
battle line extended, with consequent increase of outlay, so
that it was quite impossible to undertake redemption as
promised. Therefore, the Minister of Finance gave notice of
the postponement of redemption to the Bank of Japan,
naming June 30 of the same year as the date set for redemp-
tion. However, by April the cash on hand in the Treasury
had increased to such an extent that 3,000,000 yen of the loan
was paid off, which was the first redemption of loans from the
Bank of Japan. Thereafter redemption took place frequently [
at the convenience of the Treasury, although sometimes?'
redemption had to be postponed, not being completed until.
May, 1896.

SUPPLY OF WAR FUNDS

11

The loan based on Law No. 8 of 1895 was redeemed in May,
1896, after having been postponed frequently, like the former
loan. The details of the loan follow:

Date of redemption

Amount of redemption

Total

By Law 25

By Law 8

Aor. 18. i8qs

Yen

3,000,000

2,000,000

3,000,000

920,000

1,310,000

4,130,000

1 ,300,000

440,000

760,000

160,000

2,020,000

1,460,000

Yen
3,000,000

Mav I. 1 80s

2,000,000

Mav I •> i8qs

3,000,000

Feb \ i8q6

920,000

Feb 8 i8q6

1,310,000

Mar 2 i8q6

4,130,000

Mar 26 i8q6

1,300,000

Mar 26 i8q6

440,000

Mar "^i i8q6

760,000

Apr 22 1896

160,000

May 14 1896

2,020,000

May 20 1896

20,260,000

21,720,000

Total

20,500,000

20,260.000

40,760,000

The payment of interest for the loan stood as follows:

Fiscal

years

By law No. 25
in 1894, 5%
per annum

By law No. 8
in 1895, 6%
per annum

Total

t8qj.

Yen
304,384
505,274
144,366

Yen

40,685
359,549

Yen

304,384
545,959
503,915

t8qs;

1896

Total

954 024

400,234

1,354,258

Employ

^MENT OF In

DEMNITY

The amount transferred from the sum received as indemnity
from China to the fund for making up war expenses was 82,-
171,650 yen, the details being as follows:

78

EXPENDITURES OF THE SINO-JAPANESE WAR

Items

Transferred to special account for war pur-
poses

War and transportation expenses for fiscal
year 1897-1898

Total

Amount

The amount of Chinese indemnity received for the fiscal
year 1895 was 74,143,054 yen for war indemnity, 44,907,449
yen as compensation for the retrocession of the Liaotung
peninsula, and the sum of 93,624 yen as the profit realized by
utilizing the paid-in indemnity and the marginal profit gained
from the exchange rates in Japan's favor, or 119,144,177 in
all. As first it was intended that the indemnity should be
devoted to extension of the army and navy. But as it was
necessary to bring the special accounts for the war with China
to a close at the end of March, 1896, and a public loan or a
loan of over 100,000,000 yen from the bank would be required
to do so, it was decided to use some of the indemnity to
balance the account, rather than leave the war expense to
depend on public loans and perhaps greatly disturb the
money market, while at the same time an idle surplus would
be piling up in the Treasury. Moreover the interest on
public loans had to be met. Consequently some of the in-
demnity was diverted to war expenses, leaving armament
expansion to future loans. The portion of indemnity used in
this way was 78,957,164.89 yen, while j, 2 10,000 yen was used
during the two fiscal years of 1897 and 1898 for repletion
of war funds.

PART II

ECONOMIC EFFECTS OF THE
SINO-JAPANESE WAR

CHAPTER I
INTRODUCTION

There are two distinct points of view from which the
economic effects of w^ar may be studied. The first includes
the effects upon the ordinary Hfe of the nation, and the second
the effects upon national economics and finance. This latter
includes the study of the methods of securing funds for prose-
cuting the war, rehabilitating old industries and starting new
ones after the war, and meeting the changes which result from
the fluctuation in the exchange value of money. Of these
latter changes we may mention (i) the tightening of the
money market caused by large bond issues; (2) the inflation
of the currency due to purchase of war supplies, etc. ; (3) the
rise in prices caused by the war, increase in taxes, and inflation
of the currency; (4) the increase or decrease in individual
incomes caused by financial instability, etc., and (5) the
increase in speculation due to the foregoing causes.

These, then, are the general economic effects of war to be
considered, and certainly the Sino- Japanese War was no ex-
ception, since all of the foregoing phenomena were to be
observed during and after that conflict. This fact must be
noted, however, — that it was the first international war in the
history of modem Japan, i.e., since the beginning of the
Meiji Era. Only a quarter of a century had elapsed since
great changes had taken place in our government, and this
quarter of a century therefore can not be considered a strictly
normal period. Many serious financial problems were wait-
ing to be solved, such as the adjustment of debts contracted
during the feudal or Tokugawa epoch, the securing of money
for the various needs of the new government and expenditure
of the same, and the disposal of a large number of inconvertible
notes. Moreover the new government was beset with other
difficulties — the initial conflicts of the Restoration period,
7 81

82 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

the civil war of the Southwest (1877), etc. As a result,
finances became constantly more difficult to manage, and
when the issue of inconvertible notes finally reached the
highest possible point, a decline in value set in. Only when a
central bank — the Bank of Japan — had been established, was
the agio, or difference in value between specie and notes,
removed. In 1883 a monetary standard was established
which was virtually silver, although by statute it was bi-
metallic. Soon thereafter, owing to the fluctuation in value
of silver and gold, monetary complications arose, and before
these had been settled the Sino- Japanese War broke out.
Then, in addition to the internal problems with which we
were already wrestling, we found ourselves face to face with
China in the war of 1894 — China that ancient nation with the
prestige of her four thousand years of history to count upon.
For a nation like Japan, economically unsteady, and not yet
prepared for a long fight, to challenge such an antagonist was
like sweeping the sea with a broom — an impossible task,
indeed, it seemed! So, although the valiant spirit of the
people made up for the shortage of material supplies to some
extent, we must admit that our power of continued resistance,
financial and economical, was very weak, and that the effects
of war upon the national economics and finance were very
severe.

First, let us proceed to consider the financial effects of the
war. The whole expenditure amounted to more than 250,-
000,000 yen. Besides this, the expenses of various post-bellum
undertakings were enormous, so that the people had to endure
a constant and heavy drain. The total amount of the Treas-
ury's annual disbursement at once became double that before
the war. As to revenues, taxes had not been materially in-
creased in order to meet the expenditure during the war, as
this was largely met by means of war loans ; while for restoring
normal conditions after the war and for various post-bellum
undertakings the war indemnity secured was employed. But
this, although large, was not sufficient, and it was necessary
therefore to increase the taxes and to float loans in addition.

INTRODUCTION 83

In consequence, the whole nation, and economic circles in
particular, became heavily burdened.

Next, let us consider the general economic effects of the
war. In the first place, owing to the issue of war bonds the
money market was greatly tightened, but after victory was
secured the conditions improved. After the war, the govern-
ment and the Bank of Japan began to lend capital. By
changing a virtual silver standard into a gold standard, the
barrier to the free circulation of capital between Japan and
the gold-standard nations was removed, and, with a view to
perfecting financial facilities, hypothec and industrial banks
were established. The loan power of the Bank of Japan was
extended. The national banks, which so far had been an
incubus upon industry, were transformed into ordinary banks.
These steps facilitated the circulation of capital and helped
considerably to ease the money market. But this easy
condition, together with the craze for speculation rife among
a people drunk with victory, caused a great financial panic
which subsided only in 1 903-1 904.

Secondly, as a result of issuing bonds during the war, and
increasing taxes and notes as a measure of relief for the
financial world, the volume of currency was considerably en-
larged and the prices of commodities in general rose, the more
so as the money market before the war had been tight and the
entire amount of currency small.

To take another point of view, let us consider that the
Sino- Japanese War was the first international war which
Japan had fought in modem times and that the people were
unaccustomed to such experiences as they were then having.
In addition, mindful of the dangers of fighting against this
vast and ancient empire, they were entertaining grave anx-
ieties as to the future. Fortunately for Japan, the war ended
in a glorious victory for her so that the people came to realize
that the efforts made during the quarter of a century past had
not been made in vain. They were then fired with ambition
to exert more energy along the line of national endeavor, so
that Japan might extend her power in the Far East, and to

84 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

this end the government and people cooperated in various
post-bellum undertakings. Means of communication and
transportation, as well as financial organs, were perfected,
educational institutions were improved, industries encouraged,
various facilities to develop foreign trade established, and the
system of encouraging shipbuilding and navigation by sub-
sidies or grants of money was established. Thus the com--
mercial standing of the nation was improved and industry,
commerce, communication and various hitherto undeveloped
enterprises were revolutionized so as to fit in with the new
period, and therefore any discussion of the effects of the war is
really identical with an historical statement of the progress
made in these national activities. As for the increase or
decrease in individual incomes, such are the inevitable results
of wars and other great cataclysms of society. Especially is
this true when the stock market is favorable, following the
inception of post-bellum enterprises by the government and
people. After the Sino-Japanese War great changes in
private incomes were particularly common.

The foregoing various phenomena were important results of
the war. But what is to be considered as the most important
result was the effect of the war upon the life of the people.
This was felt for a very much longer period than other effects.
The expenditure for the Sino-Japanese War was about 25a
million yen. But we must also take into consideration the
indirect losses suffered on account of the war, the expenditure
required to restore normal conditions after the war, and the
capital employed for various post-bellum undertakings. When
these losses and expenses are added together, the amount
reaches an enormous figure. This amount could be tempo-
rarily met to be sure by means of bond issues, loans secured
from the central bank, the sale of government property, and
contributions by the people (especially during the war), etc.
But in the long run it had to be met by revenue from taxes
(direct and indirect), and the result was (i) an increase in the
burdens borne by the people by the establishment of new and
the increase of old taxes; (2) the permanent inflation of the

INTRODUCTION 85

currency; and (3) a rise in the prices of commodities, etc.
The difference between rich and poor then became more
noticeable, the difficulty of living on the part of the majority
of the people and also their discontent increased, while social
and political transformations consequent upon the foregoing
phenomena took place. These changes, indeed, constitute
the most important problem for study.

The increase in t"he burdens of the people, the inflation of
the currency, and the rise in the prices of commodities were
all actual phenomena observed after the Sino-Japanese War.
Fortunately in Japan wages for labor and the other sources of.
income of the people rose in proportion to the rise in prices,
so that the evil effects of the change were not felt so very
sharply. But the increase in the difference between rich and
poor and the difficulty of living for the majority became more
and more well-defined facts, so that farmers began to leave
their homes and flock to cities or manufacturing towns. The
beauty and simplicity of country life which had generally
prevailed before was gone and the country districts were left
to decay. Concentration of the population in cities tended to
increase the difficulty of living. But as Japan has only
recently been opened to Western civilization, and is situated in
the Far East where the civilized nations of the west are con-
centrating their energy upon conquest, she has been so busily
engaged in establishing herself as an independent power that
she has not yet had time to pay proper attention to the
question of living as it concerns the generality of the people.
Consequently, the burdens of the people increased considerably
after the Sino-Japanese War, and even yet they can not
enjoy the happiness of perfect living conditions. Yet this
state of affairs was the natural result of the geographical
position of Japan, and it may not be strictly true to say that
it was a direct result of the Sino-Japanese War. But as
international diplomatic relations of Japan assumed more
importance, with the Sino-Japanese War as the starting point,
and as it was this war which exposed the weakness of China
and thereby encouraged the Western Powers to bring pressure

86 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

to bear upon the East, our statement in the foregoing para-
graph may be seen to be a correct one. We shall now go into
more detail as to each of the phenomena mentioned above,
expressing our views in concrete form in order to show how
far reaching the effect of the Sino- Japanese War was upon our
economic world.

CHAPTER II
EFFECTS ON PUBLIC FINANCE

The effects of the Sino- Japanese War on public finance were
most directly shown in the annual budgets of the government.
We shall therefore present tables giving the annual budgets
from 1893, the year before the Sino- Japanese War, to 1903, the
year before the Russo-Japanese War, in order to show the influ-
ence of the former war upon the annual budgets of the nation.
Annual Revenue, i 893-1 903

Fiscal Year

Ordinary

Extraordinary

Total

189^

Yen

85,883,080

89,748,454

95,444,652

104,904,501

124,222,964

132,869,336

177,328,528

192,170,081

202,035,100

221,240,408

224,180,699

Yen
27,886,300

8,421,574
22,988,069
82,114,922

102,167,159
87,184,792
76,925,996

103,684,787
72,323,950
76,101,016
36,040,059

Yen
113,769,380
98,170,028
118,432,721
187,019,423
226,390,123
220,054,128

254,254,524
295,854,868
274,359,050
297,341,424
260,220,758

1 804.

1895

1896

I 8q7

1898

iSqq

IQOO

IQOI

IQ02

lOO-?

Total

650.027,803

695,838,624

1,345,866,427

Annual Expenditures, i 893-1903

Fiscal year

Ordinary

Extraordinary

Total

1893

Yen

64,545,599
60,421,346
67,148,007
100,712,816
107,695,127
119,072,144
137,590,418
149,134,167
160,363,583
171,059,808
169,761,914

Yen
20,036,273
17,707,297
18,169,173
68,143,692

115,983,717
100,685,424
116,575,120
143,615,892
106,493,241
118,166,923
79,834,217

Yen

84,581,872

78,128,643

85,317,180

168,856,508

223,678,844

219,757,568

254,165,538

292,750,059

266,856,824

289,226,731

249,596,131

i8qa.

1895

i8q6

1897. . . .

1898

1899

1900

IQOI

1902

1903

Total

307,504,929

905,410,969

1,212,915,898

87

88

ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Taking the figures for 1893 as 100, the percentages of the
figures for the other years will be as follows:

Annual Revenue and Expenditures, 1893-1903, in Percentage

Fiscal year

1893
1894
1895
1896

1897
1898
1899
1900
1901
1902
1903

Revenue

Ordinary

100. o

104 -5
III .1
122. 1
144.6

1547
206.5
223.8

235 -2

257 -6
261 .0

Extraor-
dinary

100. o
30.2
82.4

294

366.

312.

275

371

259

272.

29.2

Total

100. o
86.3

104. 1
164.4
199.0
193-4
223.5
260.1

241 .2
261 .4
228.7

Expenditures

Ordinary

100. o
93-6
104.0
156.0
166.9
184.4
213. 1
231 .1
248.5
265.0
263.0

Extraor-
dinary

100

88,
90
340
578
502
581
716

531
589
398

Total

0

100

4

92.

7

100.

I

199

9

283.

5

259

8

300

8

346

5

315

8

342

4

295

The foregoing tables show that the annual budget which
was 84 million yen in 1897 became twice as big after the war,
that is, over 168 million yen. It increased gradually until in
1903 it reached over 249 million yen, that is, an increase of 195
per cent. Now what was the cause of this increase in ex-
penditure, and from what source was the revenue to come to
offset it? To make this clear will be to make clear the effects
of the war upon finance.

The Sino-Japanese War was, as stated above, the first in-
ternational war which Japan had waged since the Restoration
of Meiji. Abroad it raised the status of Japan and proved
her to be in reality the protector of the safety and peace of
the Far East, and thus gave her an established position among
the great powers of the world. At home, it enabled her to
realize her own power, through the experience of a continental
war, and at the same time gave her the opportunity to rise in
power, through victory in this war, in accordance with the
forward policy laid down at the time of the Restoration. Even
the tragic incident at the close of this war, the interference by
the three European Powers, was only an added incentive to the

EFFECTS ON PUBLIC FINANCE 89

nation to exert her utmost energy for the development of
national power and the replenishment and expansion of the
provisions for national defense. Naturally the expenditures
greatly increased, because an enormous amount of money was
needed at the time of the war, not only for war expenses but
also for the increase in the ordinary administrative expenses
owing to the war, and again after the war to repay the princi-
pal and interest of the various war bonds. These were
assuredly the reasons why the annual national budget in-
creased so much after the Sino-Japanese War.

The effects of the war upon national finance may be dis-
cussed under two headings —

(i) Securing of a war fund and readjustments incident
thereto.

(2) Post-bellum enterprises.

The first of these two points was discussed in detail in the
third Chapter of Part I, under the heading "Supply of War
Funds," so we shall omit it here. We might remark here,
however, that the only item under this head which caused
financial trouble in later days was the issue of war bonds. ^
The redemption and interest payments on these bonds were
completed in July, 1910. We shall discuss this matter in
detail in the next section.

As for the enterprises undertaken after the war, they were
many and various. The chief items were (i) rehabilitation
and expansion of the army and the navy (the latter on a scale
commensurate with the change in the national status after
the war) and the establishment of an iron foundry; (2) im-
provement of educational institutions in order to cherish and
develop the national strength, increase of legations abroad,
river repairs, railway construction and improvement, exten-
sion of the telephone system, expansion of foreign trade,
subsidies for shipbuilding, encouragement of navigation and
extension of sea traffic, readjustment of the monetary system,
perfecting of financial facilities and agricultural institutions,

^ Amount of bonds issued, 124,920,750 yen; amount actually received, 122,437,-
^87 yen.

90 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

colonial development of Hokkaido, and the establishment of
various facilities for the government of the newly acquired
territories. In order to put the foregoing plans into execution,
the government approved the national budget outlined below :

1. Plan to meet the increase in expenditure after 1896:

(a) As sources of revenue to meet ordinary expenditure due
to post-bellum undertakings, a sake tax, a business tax, and a
registry tax shall be levied, and a leaf tobacco monopoly
established.

(b) For army and navy expansion and for the establishment
of a new iron foundry, a part of the indemnity collected from
China was to be used.

(c) As sources of revenue for railway and telephone im-
provement or extension, bonds were to be issued.

2. Plan to meet the war expenditure, dispose of the in-
demnity received from China and provide a budget system
for Formosa:

(a) As the indemnity was collected from China in yearly
instalments, it seemed wise to appropriate the money for use
in a continuation plan embracing a certain number of years.
Thus the indemnity was appropriated for the redemption of
war debts, army and navy expansion, the establishment of an
iron foundry, a reserve fund for emergencies and a subsidy to
the Bank of Agriculture and Industry.

(b) The annual budget for Formosa was to be separated
from the general accounts of the central government and a
plan worked out relative to annual revenue and expenditure
which should be instituted to enable Formosa gradually to-
establish a system of self-government.

3. Plan to extend facilities for transportation, communica-
tion and finance:

(a) Bonds were to be issued to meet the expense of im-
provement and extension of railways and telephones.

(b) The service capacity of the Bank of Japan and the
Yokohama Specie Bank were to be enlarged and in addition
a hypothec bank and banks of agriculture and industry were
to be established.

EFFECTS ON PUBLIC FINANCE

91

We shall now briefly consider the amount required and the
resources available for the fund to carry out the proposed
plans, including the extension of the means of national de-
fense, the perfection of railway and telephone systems, the
establishment of a new iron foundry, and especially the
encouragement of navigation.

Table I at the end of this chapter^ and the following tables
will give a fair idea of the effects of the Sino-Japanese War
upon our national finance as a whole.

Comparing the total amounts in Table P with the total
annual expenditure, we see that in ten years these amounts
actually correspond (in average) to approximately 28.29 per
cent of the total annual expenditure.

Comparison of Expenditures for Post-bellum Enterprises with the
Total Annual Expenditures

Fiscal year

Total expenditure
for principal post-
bellum enterprises

Total annual
expenditures

Percentage of post-
bellum expenses to
total annual ex-
penditures

1804

Yen

2,827,463

5,279,892

29,303,746

85,048,595

94,813,702

112,062,975

118,639,050

98,278,837

75.965,524
67,137,005

Yen
78,128,643

85,317,179
168,856,509
223,678,844

219,757,569
254,165,528
292,750,059
266,856,824
289,226,731
249,596,131

Per cent
3-62
6.19

17-35
38.02

43 14
44.09

40.53
36.83
26.27
26.90

i8q«>

i8q6. .

i8q7. . . .

1898

I 8qq

IQOO

IQOI

1902

IQO-;

Total

689,356,789

2,128,334,017

28.29«

» Average.

In order to secure this large amount, the government, as
stated before, adopted the measures of increasing taxes, issuing
bonds and transferring the war indemnity. The following
table will show the most important items of revenue r^

^ Post, p. 141.

2 The figures for the revenue from newly established taxes were taken from the
actual receipts and the figures for the old taxes whose rates were raised were
taken from the estimate of the expected increase.

The revenue from the bond issues means the revenue from the bonds issued for
the railways, the industries, the Hokkaido railways, and the Formosan enterprises.

92 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Revenue for Post-bellum Enterprises

Fiscal year

Revenue from

increase of

taxes

Transfer of

indemnity

fund

Issue of
bonds

Total

1896

1897

1898

1899

1900

1901

1902

1903

Yen
15,708,589
29,701,472
35,617,100
63,810,962
85,710,491
90,404,052
95,621,115
100,073,693

Yen

11,789,389
40.360,796
46,187,071
32,636,905
31,240,140
20,883,427
13,866,937
9,514,215

Yen

2,796,600

36,389,874

35,352,806

35,166,404

38,139,599

31,721,764

12,741,033

6,881,256

Yen

30,294,578

106,452,142

117,156,977
131,614,271
155090,230
143,009,243
122,229,085
116,469,164

Total . . .

516,647,474

206,478,880

199,189,336

922,315,690

With the expansion of the general national finance owing to
the aforesaid causes, the expenditure of the local governments
naturally increased in proportion. Table II at the end of
this chapter^ was taken from the report of the investigation of
the Home Department to show the actual condition as to
expansion of revenue and expenditure of local communities.

The cause of this increase in expenditure was largely due
to the increase required for construction work, encouragement
of industry and educational enterprises, because of the policy
adopted by local communities to develop the national re-
sources and industries in accordance with the post-bellum
plans of expansion. According to the Japanese system of
government, the local communities (prefecture, city, borough,
township, village) have been invested with complete power as
legal persons, and the officials in these local communities,
besides performing their duties to the communities, are
called upon for the additional service of managing the various
local enterprises entrusted to them by the central government
and of supervising the expenditure therefor. With a change
in the status of the nation the duties of these local officials
were correspondingly increased, and hence the increase in
local expenditure. Thus, since the expansion of the finance of
local governments inevitably keeps pace with the advance-

* Post, p. 142.

EFFECTS ON PUBLIC FINANCE 93

ment of a nation, it was natural that with the national
expansion along various lines after the Sino- Japanese War, an
increase in local expenditure should take place also.

In short, after the Sino- Japanese War, Japan spent enor-
mous amounts for central and local administration in view of
the post-bellum enterprises, that is, for expansion of means of
defense, development of resources and industries, and for
improvement of education. The pressure of this increase of
expenditure upon the people was certainly crushing. This
together with the changes caused by the war upon economics
in general produced serious effects upon the economic world,
which lasted throughout the entire period in which the post-
bellum enterprises were being prosecuted, as we state more
fully later. But, on the other hand, our fellow countrymen,
moved by the new self-realization following the war, and by
the feeling of uncertainty concerning the national existence
due to the insult inflicted upon us by the interference of the
triple European Powers, rose to the occasion, and sturdily
resisted the paralyzing pressure of circumstances. We have
successfully prosecuted the post-bellum enterprises started by
the government, mastered all difficulties by developing the
power of resistance, and finally raised the nation's prestige so
high that within the short period of ten years or so Japan has
risen to be a mighty power in her recently enlarged sphere
in the Far East. This fact should be remembered in discuss-
ing the financial expansion of the nation. This indomitable
spirit asserted itself more and more, so that Japan did not
retrograde in any direction. This is the reason why we
have peace in the Orient, a fact which should be recorded as
in the nature of a miracle.

State Finance

We have briefly reviewed the effects of the Sino-Japanese
War upon the national finance in general. To sum up, the
expenditure in the first year after the war, 1896, was twice as
large as that for the year before the war, 1893, and three
years after, in 1899, it was three times as large. This tendency

94 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

to increase continued steadily until the year 1903 just before
the Russo-Japanese War. Such was the history of the
expenditure. As for the revenue, in 1897 it was twice as
large as in 1893, and the tendency to increase continued. In
1893 the revenue was 113,769,380.54 yen and the expenditure
84,581,871.56 ;yew; that is, there was an excess of 29,187,508.97
yen of revenue over expenditure, so that the rate of expansion
of the revenue in later years was not so extraordinary as that
of the expenditure. Table III at the end of this chapter ^ was
compiled to show these facts.

The direct effects of the Sino-Japanese War upon our
finance were felt in securing special administration funds
for the war and in connection with the war (hereafter called
war expenses). The total amount of these expenses was
approximately 236 million yen. The greater part of this
amount was secured through the issue of war bonds and the
transfer of the war indemnity, so that it did not have any very
serious effect upon the ordinary revenue of the nation, as we
have stated before.^ Consequently the burden of the war
expenses which had to be borne afterward was confined to the
redemption of the war bonds and the payment of interest on
them. We shall later explain this point in detail.

Thus it will be seen that the greatest effects of the Sino-
Japanese War upon our finance were in connection with post-
bellum enterprises. Of those undertaken since 1896, the
chief, as stated before, were the enlargement of the army and
navy, the establishment of an iron foundry, the building and
improvement of railways, the extension of the telephone
system, the extension of educational work, the establishment
of the Hypothec Bank, the Banks of Agriculture and Industry
and the Bank of Formosa, enterprises in Formosa, undertak-
ings in agriculture, industry and commerce and the adjust-
ment of water courses. All these enterprises had for their
object the perfecting of the means of national defense and the
developing of the wealth of the nation. We shall here briefly
describe the plans for these post-bellum enterprises.

1 Post, p. 143. 2 Pt. I, Chap. III.

EFFECTS ON PUBLIC FINANCE 95

(i) According to the documents introduced in the Diet,
together with the budget in 1896, the post-bellum enterprises
were planned to be completed in ten years, from 1896 to 1905,
with the amount of expenditure estimated at about 587
million yen; the tax system was readjusted, a part of the war
indemnity was to be transferred to the fund and bonds were
to be issued to meet the remainder. The following is the total
expenditure for the ten years.

Total Expenditure for Period i 896-1 905

Expansion of means of defense: Yen Yen

Army 205,802,866

Na\T 145,572,264

351,375.130

Extension of enterprises:

Iron foundry 4.095.793

Railway to be built between Sorachita and Asahig-

awa 1,1 78,330

Improvement of existing government railway lines 26,553,000

Extension of telephone exchange system 12,802,102

First year's interest on telephone and railway bonds 1,278,080
Establishment of bureaus to handle leaf tobacco

and capital 12,213,550

58,120,855

Expansion of administrative expenditure:

Principal and interest payments on loans 110,401,056

Annual salaries of soldiers, rewards and pensions. . . 112,940,810

Expense of collecting increased taxes 12,653,833

Expenses of soldiers stationed in Weihaiwei and

various Formosan expenses 27,500,000

Subsidies to banks 13,750,000

Expenses of printing and issuing bonds 598,520

277,844,219

Total 687,340,204

The complete ten-year plan for revenue to meet the fore-
going items of expenditure is as follows:

Ten-year Revenue Plan, 1896-1905

Yen

Natural increase of annual revenue 147,698,971

Increased taxes and adjustment of tax system 246,543,081

Fund to pay off the expenses of guards at Weihaiwei 5,250,000

War indemnity 40.093,387

Bonds 133,648,889

Profits from bonds for railway and telephone enterprises 11,680,414

Total 584,914,742

96 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

(2) The plans for post-bellum enterprises did not end with
those mentioned in the foregoing paragraphs. Both the
number of enterprises and the amount of appropriation asked
for were increased. In the enlarged scheme the principal
items were means of defense, construction of railways and
establishment of an iron foundry. The change in the plan
relating to expenditure necessitated a change in the plan for
securing revenue. The taxes were increased again, the amount
transferred from the war indemnity was also increased and the
bond issue enlarged, thereby maintaining the balance between
expenditure and revenue. This point will be explained in
detail later.

There is one more point to be noted here, and that is re-
garding the revenue from the indemnity of the Sino- Japanese
War. The total amount of the indemnity and other special
funds was 368,248,691 yen. The war indemnity and other
revenues were handled as a ''Special Account Fund" in
accordance with our accounting regulations. These separate
amounts are shown as follows :

Yen Yen

Indemnity for war expenses 311,072,865

Indemnity for return of Liaotung Peninsula 44,907,499

Interest on indemnity employed profitably 8,888,224

364,868,588

Fund to pay back expense of maintaining guards at

Weihaiwei 3,380,103

Total 368,248,691

The indemnity as analyzed in the foregoing paragraph was
an adequate source of revenue for conducting post-bellum
enterprises and replenishing the war fund. The total amount
actually transferred for the support of post-bellum enterprises
was 278,690,217 yen. The details are as follows:

Yen

Repayment of Sino-Japanese War expenses 78,957,165

Transferred to fund for various post-bellum enterprises: Yen

Army expansion 56,781,709

Navy expansion . 139,157,096

Establishment of iron foundry 579,762

Fund for special war expenses, transportation,

communication, 1897 3,214,485

199733.052

Total 278,690,217

EFFECTS ON PUBLIC FINANCE - 97

The foregoing amounts were drawn from the 364,868,587 of
indemnity. The fund to pay back the expense of maintaining
guards at Weihaiwei was from the beginning transferred
from the general account. Of the indemnity received, 20
million yen was transferred to a fund for the use of the Im-
perial family, 50 million yen to three funds, viz., one for
replenishing warships and torpedo boats, another for emer-
gencies due to natural disasters and the third for educational
purposes, while 12 million yen was transferred to the General
Account in 1898.

The greater part of the indemnity and the special revenues
was used for the war and for various other expenses connected
with the war. The indemnity has had a considerable effect
upon our national finance. We shall discuss it in detail later.

Expansion of means of defense

The government recognized, after the war with China, that
the then existing army and navy were inadequate, in view of
the condition of the country at that period, and formulated a
plan of expansion which was put into execution from 1895.

For the first period of expansion, the army asked for an
appropriation of 43,320,000 yen as a fund for a continuation
plan to extend over four years, from 1895 until 1899, and the
navy asked for 94,770,000 yen as a fund for a similar plan
covering the seven years from 1895 until 1903. The general
outline of these plans of expansion was for the army to es-
tablish additional divisions and to construct fortresses, etc.,
and for the navy to increase its strength by means of new
warships and torpedoes. Up to that period our military
strength was seven divisions for standing service, with about
50,000 men in time of peace and 200,000 in time of war.
According to the new plan six new divisions were to be added,
so that in peace the number of men would be 150,000 and in
war about 600,000. And the navy which had up to that
period 50,000 tons of warships, was to be increased to 200,000
tons or more. The new plans of expansion were severely
criticised by the people.

98 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

There was much opposition in the national Diet. But the
nation generally recognized the need of expansion of the means
of defense, and the plans were at length carried out.

But in the first period of expansion, the army counted only
the cost of erecting fortresses, building barracks, securing the
first supply of arms and implements for use in camp and other
immediately necessary expenses for the standing army.
The arrangements necessary for war preparedness had not yet
been perfected. The navy counted only the cost of the
number of warships and torpedoes which were immediately
needed, and in order to perfect the original plan still larger
appropriations had to be asked for. Thorough investigation
was therefore made as to the unfinished work after that, and,
as a result, additional appropriations were asked for in the
budget for 1897.

The estimate of expenses for the second period of expan-
sion was 38,350,000 yen for the army as a fund for the contin-
uation plan from 1897 to 1903; and 118,320,000 yen for the
na\^ for a similar plan from 1897 to 1905; totaling 156,670,-
000 yen for both army and navy. These demands of the army
and navy were secured through the approval of the Diet.

In 1899 the third period of expansion was entered upon in
accordance with the plans described in the foregoing para-
graphs. The establishment of the seven army divisions was
perfected and fortresses were improved or newly made in
the islands of Formosa and Pescadores. For all of these
18,040,000 yen was requested, as a fund for a continuation
plan extending from 1899 to 1906.

Besides the foregoing, in the same year, the appropriation
for army expansion had to be increased owing to the rise in
•prices, so that an additional 5,210,000 yen was appropriated as
a fund for repairs, for securing implements and for the mis-
cellaneous expenses of the construction bureau, while the
naval expansion fund was reduced by 1,450,000 yen after
providing for construction of the fortresses already decided
upon, owing to a difference in the exchange rates of 3,350,000
yen.

EFFECTS ON PUBLIC FINANCE

99

Thus the plans for expansion of the army and navy were
commenced in 1896 and after going through the first and the
second period of expansion were nearly completed when in
1899 the plans for the establishment of the seventh division,
and construction of the fortresses in Tsushima, Kielung and
Pescadores Island, were carried out, so that great financial
problems of the past four years were solved for the time being.

Just how great was the expenditure for defense after these
great plans for expansion had been laid, is showTi in the follow-
ing tables :

Expenditures for Defense, i 893-1903
Army

Fiscal year

Ordinary

Extraordinary

Total

180-?

Yen
12,419,829
7,828,074
8,410,212
22,613,590
28,746,263
32,562,072
35,577,310
36,123,892
37,433,911
39,169,669
39,355,388

Yen

2,301,397

2,580,862

1,605,723

30,628,934

31,401,725

21,335,581

16,973,888

38,714,309

20,947,869

10,272,390

7,529,174

Yen
14,721,226
10,408,936
10,015,935
53,242,524
60.14.7.088

z}''^

i8q4.

i8qs

1896

I 8q7

i8q8

53,897,653
52,551,198
74,838,201
58,381,780
49,442,059
46,884,562

i8qq

IQOO

IQOI

I Q02

iqo-?

Total

300,240,210

184,291,852

484,532,062

Navy

Fiscal year

Ordinary

Extraordinary

Total

180-^

Yen
5,141,475
4,573,605
4,913,244
7,351,330
9,543,889
11,191,475

14,577,114
16,911,000

19.484,953
21,063,345
21,530,237

Yen
2,959,446

5,679,549

8,607,025

12,654,428

40,850,645

47,338,427
47,084,496

41,363,895
24,494,375
15,262,843
14,587,620

Yen

8,100,921

10,253,154

13,520,269

20,005,758

50,394,534
58,529,902

61 661 610

1804

i8qs

1896

1897

1898

i8qq

IQOO

58,274,895
43,979,328
36,326,188
36,117,857

IQOI

IQ02

lOO"?

Total

136,281,667

260,882,749

397,164,416

lOO ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

From this table it will be seen that after 1896 both the
ordinary and the extraordinary expenditures suddenly in-
creased. The amount of increase required by the plan of
expansion of the means of defense may be seen from the follow-
ing, abstracted from the figures in the foregoing table : ^

Increased Expenditures for Army and Navy, Due to Plan of Expansion,

1 896-1903

Fiscal
year

Army

Navy

Total for

Ordinary

Extraor-
dinary

Total

Extraor-
dinary

Army and
Navy

1896

1897...
1898....

1899...

1900

1901

1902

1903... •

Yen

4,548,454
4,981,063
8,675,720
12,423,570
13,171,994
13,145,759
13,149,013

13,423,344

Yen
8,437,262
21,914,002
14,847,021
14,055,883
19,202,826
11,669,525

6,192,555
4,628,109

Yen
12,985,716
26,895,065
23,522,741
26,479,453
32,374,820
24,815,284
19,341,568
18,051,453

Yen

4,043,288
32,487,404
44,554,683
45,369,046
33,238,685
21,147,756
12,568,445

9,552,430

Yen
17,029,004
59,382,469
68,077,424
71,848,499

65,613,505
45,963,040
31,910,013
27,603,883

Total .

83.518,917

100,947,183

184,466,100

202,961,737

387,427.837

We have briefly explained the tendency to an increase in
both ordinary and extraordinary expenses in accordance with
the plan of expansion of the army and the navy. We must
now proceed to explain in detail the extraordinary expenditure
which is the main thing in the plan of expansion of the means
of defense. As we have before stated, this plan was carried
out gradually, having been incorporated in the budget of 1 896
as the first period, in 1897 as the second, and in 1899 as the
third, thereby gradually perfecting the work of national de-
fense as a part of the post-bellum program. The following is a
table of the amounts required by this expansion plan:

^ The ordinary expenditure for the army includes the expenses of the seventh,
eighth, ninth, tenth, eleventh and twelfth divisions, the expenses of the guards in
Formosa and other miscellaneous expenses, the expenses of the guards in Korea
and the expenses of the guards at Weihaiwei. Of these, the last two items have
no relation to the plan of expansion of defenses. But as they are the result of the
war, they are included in the figures here given. As for the ordinary expenditure
for the navy, as it is difficult to single out the expenses due to the plan of expansion,
they are not given here separately.

EFFECTS ON PUBLIC FINANCE

lOI

Budget of Extraordinajiy Expenses Due to Expansion Plan

First
period.
1896 on

Second
period,
1897 on

Third
period,
1899 on

Additional
appropria-
tion. 1899

Total

Army:

Construction of fortresses .
Repairs and initial pur-
chase of arms

Yen

14,071.894

17.334.891
8,486,767

2,949,108

479,576

Yen
. 6,460,520

19.363,747
9.854.538

3.542
2,679.790

Yen

9.829.134

8.220.583

Yen
5,208,478

Yen
27.010, I97»

50,127.699

Manufacture of arms

Expansion of plant in

18.341.30s
2,949,108

Expenses of Army Con-
struction Section

Deficit

483.118
2,679,790

Total

43.322,236

38,362,137

18.049.717

5,208,478

101,591,217''

Navy:

Ship construction

Manufacture of arms

Construction expenses. . . .

47,154.576
33.751.163
13.870,507

78,893.399

33,176,330

6,254.990

....

125,169,547"
66.355.072d
20,125.497

Total

94.776,246

118.324.719

Grand Total

138,098,482

156,686,855

18,049,717

5.208,478

3 13.241. 333'»

» The difference in exchange rate, 3.35i.3Si yen, has been deducted.
^ The difference in exchange rate has been deducted.
" The difference in exchange rate, 572,421 yen, has been deducted,
d The difference in exchange rate. 878,428 yen, has been deducted.

The results of the execution of the foregoing budget may be
seen in the following table:

Extraordinary Expansion Expenses
Army

Fiscal year

Construction
of fortresses

Repairs and
initial pur-
chase of
arms

Manufacture
of arms

Additional

Total

1896

1897

1898

1899

1900

1901

1902

1903

Yen
1,291,730
3,157,624
2,970,401

3,465,359
5,616,912

4,433,293
1,591,202

2,919,341

Yen

5,739,279
12,601,558
7,404,500
6,928,578
9,309,375
4,482,973
2,756,393
1,697,811

Yen

934,061
2,639,205
2,492,243
3,541,755
4,216,945
2,706,436
1,810,659

Yen

472,192
3,515,615
1,979,877

120,192

59,594
46,823

44,301
10,957

Yen

8,437,262

21,914,002

14,847,021

14,055,884

19,202,826

11,669,525

6,202,555

4,628,109

Total .

25,445,862

50,920.467

18,341,304

6,249,551

100,957,184

102 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

Navy

Fiscal year

Construction
of ships

Manufacture
of arms

Construction
of buildings

Total

1896

1897

1898

1899

1900

1901

1902

1903

Yen
3,099,482

23,913,987
30,298,987
26,233,569
17,565,610

9,523,391
5,964,095
4,826,199

Yen

799,209

7,218,321

12,440,942

16,859,198

12,498,883

7,382,769

3,829,959

2,592,492

Yen

144,596
1,355,096

1,814,753
2,276,279

3,174,192
4,241,596
2,774,391
2,134,739

Yen

4,043,287
32,487,404
44,554,682
45,369,046
33,238,685
21,147,756
12,568,445

9,553,430

Total

121,425,320

63,621,773

17,915,642

202,962,735

Increase of administrative expenses
Not only did the administrative expenses of various kinds
increase on account of the plans for the post-bellum enter-
prises after the Sino-Japanese War but by reason of the
general national advancement, which added to the increase in
administrative expenses. The following table shows the
expense of the public debts, the expenditure for defense and
the general administrative expenses separately:
Expenditures on Account of Public Debts, Defense, and Administration

Fiscal year

Public Debts

Defenses

General Ad-
ministration

Total

Yen

Yen

Yen

Yen

1893

19,455,918

22,905,993

43,457,517

85,819,428

1894

19,721,143

20,764,267

40,304,766

80,790,176

1895

24,190,858

23,671,985

39,580,507

87,443,350

1896

30,504,172

73,416,902

68,479,552

172,400,626

1897

29,504,731

110,666,757

91,459.859

231,631,347

1898

28,379,828

112,634,626

85,990,576

227,005,030

1899

34,278,956

114,307,693

105,578,889

254,165,538

1900

34,841,135

133,173,581

124,735,343

292,750,059

1901

38,085,910

102,248,927

126,521,988

266,856,825

1902

76,075,690

85,863,957

127,287,083

289,226,730

1903

36,484,520

83,218026

129,893,585

249,596,131

Total. . . .

371,522,861

882,872,714

983,289,665

2,237,685,240

The following table shows the foregoing different items of
expense in their respective ratios, and how large was the ratio
of the general administrative expense.

EFFECTS ON PUBLIC FINANCE IO3

Ratio of Public Debt, Defense and Administrative Expenditures

Fiscal year

Public debts

Defenses

General
Administration

1893
1894

1895
1896

1897
1898
1899
1900
1901
1902
1903

Per cent
22.7
24,
27,

17
12
12
13

Per cent

14
26

14.6

Per cent
50.6

It will be seen from Table IV at the end of this chapter ^ that
the various national expenses have increased enormously
since 1896. We must here briefly survey the various post-
bellum enterprises which were the cause of the increase in the
general administrative expenses. Of these, the following
may be especially mentioned: (i) establishment of an iron
foundry and extension of the same; (2) construction and
improvement of railways; (3) extension of telephone ex-
changes; (4) subsidies to various special banks; (5) subsidies
for the encouragement of navigation ; (6) sundry expenses in-
curred for Formosa, etc. These will be explained in the order
above enumerated.

ESTABLISHMENT AND EXTENSION OF IRON FOUNDRY

The establishment of an iron foundry was the most impor-
tant of the post-bellum enterprises, because the demand for
iron manufactures increased enormously every year. Then in
connection with the plan to extend the means for national de-
fense it was plain that, as iron was the principal material used
in building warships and manufacturing arms, in case of
emergency the supplies must be obtainable at home. Thus
the iron foundry came to be established. As to the expense of
its establishment, 4,095,793 yen were asked for in the national
budget in 1896, and later, in 1898, 6,474,056 yen more were

' Post, p. 144.

104 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

added, so that the entire expense amounted to 10,569,849
yen.

The work of establishing the iron foundry gradually pro-
gressed, and in 1899 experiments in manufacturing from iron
were being made, so that there was urgent need of securing a
fixed sum as operating capital in order to commence work.
The enterprise of the iron foundry is a great industry with
far-reaching effects. The necessary supplies of ore, coal,
cement and other materials can not be secured in sufficient
amount from a few private mining concerns. Then, again,
considered from the economic point of view, as it is more
advantageous for an iron foundry to own its own mines, it
appeared necessary to secure a fund for purchasing mines
from which to obtain raw material. To hasten the work of
constructing the harbor at Wakamatsu to secure transporta-
tion conveniences, suitable subsidies must be given to the
Wakamatsu Harbor Construction Company. In order to
secure perfect results from the work of the iron foundry, the
appropriation for expenses must be reasonably increased.
So, in 1899, 8,632,845 yen'^ were added, the total amount
finally reaching 19,202,694 yen.

To meet this expense, 579,762 yen were raised from in-
demnity and 18,622,932 yen from bonds. The result of the
plan is seen in the following table :

Fiscal year

1896

1897

1898

1899

1900

1901

1902

1903

Total

Establishment
of iron foundry

Yen

157,529
709,224

1.747,572
3,011,008
7,126,198

5,853,335
490,117
820,011

19,914,994

Supplementary
appropriation

Yen

322,762

495,429

20,454

838,645

Investigation

Yen

17,942

17,942

Total

Yen

157,529
709,224

1,747,572
3,011,008
7,126,198
6,176,097
1,003,488
840,465

20,771,581

^ 500,000 yen were for harbor construction at Wakamatsu, and 4,000,000 yen a
reserve to be used as operating capital.

EFFECTS ON PUBLIC FINANCE IO5

CONSTRUCTION AND IMPROVEMENT OF RAILWAYS^

The new railway system was inaugurated by the Railway
Construction Act promulgated June 20, 1892. The continua-
tion plan adopted was to include a period of sixteen years,
beginning with 1893. At the time of the Sino-Japanese War
the total amount of the expense of railway construction as
required by this continuation plan reached 59,921,663 yen.
Thus the work of railway construction steadily progressed
and the railway lines were extended. But, at the same time,
the business of transportation increased year by year, and the
demand for service on the already constructed lines increased
more and more, so that the existing lines and the number of
cars in use were not sufficient to meet the demand. Moreover,
under abnormal conditions, service had to be refused to the
general public, as for instance, in time of war. So the govern-
ment, as the first step in advance, changed the whole of the
Tokaido Government Railway from a single to a double-
track line. Necessary improvements were added to the
stations on this, and also on the Shin-Yetsu line, the number
of cars was increased, and it was generally planned to give
entire satisfaction to both passengers and shippers in the way
of transportation facilities. This scheme was established as a
continuation plan to be worked between 1896 and 1902,
beginning in 1896. The entire expense for improvement was
estimated at 26,553,000 yen.

The work of railway construction steadily progressed in
accordance with the plan outlined in the foregoing paragraph.
In 1897 there was need of an increase in the fund for con-
struction expenses between Tsuruga and Toyama, and between
Hachioji and Nagoya. Thus, in that year 8,103,381 yen were
added, and in 1899 the fund for construction expenses between
Tsuruga and Toyama and between Sinonoi and Shiojiri was
increased by 5,133,281 yen, bringing the total amount up to
73» 1 58,325 yen. Then, in 1900, 19,529,886 yen were added in
connection with the construction of the line between Fuku-

1 See Table V at the end of this chapter, post, p. 145.

106 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

shima and Aomori, and also 2,156,248 yen as construction
expense for the line between Kaidaichi and Kure,so that at the
end of 1900 the cost of constructing railways during the first
period had reached 94,844,459 yen, and the additions made to
the first estimates for construction after the war amounted to
61,475,796 3^^w.

Besides the foregoing, in 1897 a plan for railway construc-
tion in Hokkaido was formulated, involving an expenditure of
18,562,050 yen and another in 1900 for Formosa with an ex-
penditure of 28,800,000 yen. We shall explain this plan later.
The totals in Table V at the end of this chapter ^ show the
actual results of this improvement and construction work all
over the country. The funds for these railway undertakings
were mostly secured by the issue of bonds. To be more
specific, as shown in the table, about 77 per cent of the fund
was obtained from bond issues and the rest was from the
ordinary annual revenue.

EXTENSION OF TELEPHONE EXCHANGES

Since the telephone exchange service was commenced
between Tokyo and Yokohama in 1890, and between Osaka
and Kobe in 1892, the applications for telephone installation
have increased year by year, so that even the present develop-
ment of the system is not equal to the demand. As there
were many other cities besides the four mentioned above
which demanded service, after the war the government
planned to establish a telephone system in Kyoto and the
thirty- five other cities which needed it most urgently; then
the single-line system already established was changed to a
double-line system. Other extensions were planned. In
1896 the so-called continuation plan was instituted to be
carried out between 1896 and 1902 with the sum of 12,802,-

107 yen appropriated for the entire cost of the extension.
Furthermore, in order to increase the telegraphic lines the
government executed a continuation plan between 1897 and
1898 with a budgetary estimate of 705,338.90 yen,

1 Post, p. 145.

EFFECTS ON PUBLIC FINANCE

107

The following table shows the annual disbursement for
telephone exchange extension, the actual result of the ex-
tension, and the sources from which the fund was derived:

Disbursements and Revenue for Telephone Exchange Extension

Fiscal year

1896

1897

1898

1899

1900

1901

1902

1903

Total

Cost

Yen

594.196
2,473,420
1,896,119

1,781,655
2.349,786
1,807,587
1,615.532
268,556

[2,786,851

Sources of ordi-
nary annual
revenue

Yen

437,875
72,790

10,665

Bonds issued

Yen

594,196
2,473,420
1,896,119

1,781,655
2,349,786
1,807,587

1,177,657
195,766

12,276,186

Total revenue

Yen

594.196
2,473,420
1,896,119

1,781,655
2,349,786
1,807,587
1,615,532
268,556

2,786,85]

SUBSIDIES TO VARIOUS SPECIAL BANKS

Another method adopted to improve financial facilities
after the Sino-Japanese War was the granting of subsidies to
various banks, as tabulated below.

Fiscal

Hypothec
Bank

Agricultural
and Indus-

Hokkaido
Colonial

Formosa
Colonial

Industrial
Bank of

Total

year

trial Bank

Bank

Bank

Japan

Yen

Yen

Yen

Yen

Yen

Yen

1897..

55,052

991,625

....

....

....

1,046,677

1898..

30,010

1,983,355

....

....

....

2,013,365

1899..

30,873

1 ,990,008

250,000

250,000

....

2,520,881

1900..

1,996,010

250,000

....

....

2,246,010

1901..

940,224

200,000

....

1,140,224

1902..

213,901

200,000

250,000

64,541

728,442

1903..

5,000

....

....

....

5.000

Tota

1 115,935

8,120,123

900,000

500,000

64.541

9,700,599

ENCOURAGEMENT OF NAVIGATION

Special encouragement to navigation was early planned in
accordance with the proclamation issued in September, 1886.
The government thereupon subsidized the Nippon Yusen
Kaisha to the extent of 880,000 yen annually, thus enabling

I08 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

that company to institute regular service between Yokohama
and Shanghai, Kobe and Tientsin, Kobe and Neuchang, Kobe
and Vladivostok, between various other points in Japan
proper and Hokkaido and various points along the line.
But the period of effectiveness of the proclamation expired
in September, 1900, and it then became necessary to estab-
lish a policy to govern the regular service in the future.
Previous to that, in 1896, with the object of encouraging
navigation, the government had promulgated a law according
to which subsidiary grants would be made to ships which
should subscribe to certain requirements. The highest
amount designated for this purpose was one million yen
annually, but the actual result of the operation of this law
was such an increase in ships that in 1897 no less sum than
1,700,000 yen was required for this purpose, while in 1898 the
amount needed for subsidies and extension of steamship
routes ran above five million yen. Now after the term of
subsidy to the Nippon Yusen Kaisha had expired, it was
found that if the general law were to be applied to the com-
pany in the future as it had been in the past the expense
would be increased enormously. So discussion centered
about the point whether the general regulations should be
applied to the leading regular service routes, or new special
regulations should be established. The government decided
upon the latter course, and introduced into the Diet a bill
which was later approved empowering the government to sign
a contract for an annual subsidy of 580,000 yen for five years,
from October, 1900, to September, 1905, for the chief regular
connecting lines of communication between Japan and Russia,
and China and Korea (the Yokohama-Shanghai, the Kobe-
Korea, the Kobe-North China, Kobe-Korea-North China, and
the Kobe-Vladivostok routes) and between Japan proper and
Hokkaido (the Kobe-Otaru and the Aomori-Muroran routes).
In addition, the government decided to subsidize the regular
service along the coasts of Hokkaido (between Hakodate and
Nemuro, between Otaru and Wakanai, between Nemuro and
Abashiri, and between Nemuro and Etorofu) from October,

EFFECTS ON PUBLIC FINANCE

109

\

1900, to September, 1905. To the Yangtze- Kiang, the Shang-
hai-Soochow, and the Shanghai-Hankow steamship Hnes, a
certain amount of subsidy was to be given every year to
enable them to maintain regular service. At the same time,
with a view to restricting the expenditure of the fund, the
government decided to subsidize only the regular service of
three steamship lines, European, Seattle, and San Francisco,
for ten years, i.e., from 1900 to 1909, to the extent of 2,673,894
yen for the European, 654,030 yen for the Seattle, and 1,013,-
880 yen for the San Francisco service. The government then
revised the regulations so that after January, 1899, the
amount of subsidy granted to ships constructed in foreign
countries would be cut in half and the period of assistance lim-
ited to 18 years, from October i, 1896.

In addition, the government promulgated regulations for
the encouragement of shipbuilding, by which ships built
according to a prescribed set of regulations might receive
grants, as an aid to the development of navigation.

The several budgets required to carry out the foregoing
plans are shown in the following table :

Ship Subsidies

Fiscal year

Extension of
steamer routes

Encouragement
of navigation

Encouragement
of shipbuilding

Total

1896

1897

1898

1899

1900

1901

1902

1903

Yen ■

134,775
538,702
671,321
896,898
4,205,729
5,554,440

6,387,713
6,332,448

Yen

880,000

708,384

2,580,802

3,957,315

1,188,762

906,203

676,300

802,431

Yen

13,109

213,875
187,380

152,930
581,094
411,348
437,810

Yen

1,014,775
1,260,195
3,465,998
5,041,593
5,547,421
7,041,737
7,475,361
7,572,689

Total....

24,722,026

11,700,197

1,997,546

38,419,769

SUNDRY EXPENDITURES IN CONNECTION WITH FORMOSA^

Formosa came into our possession as a result of the Treaty
of Shimonoseki. The various expenses incurred in connection

^ Especially those in connection with special undertakings in Formosa and in
Weihaiwei.

no ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

with the island increased considerably the annual expend-
iture.

The expenditure in connection with Weihaiwei was that
made necessary by its military occupation to guarantee the
fulfilment of the Treaty of Shimonoseki. It was the sum in
excess of the amount paid by the Chinese Government for the
guards' service there. Article VIII of said treaty recognized
the right of our army to occupy Weihaiwei as such guarantee.
And in Article I of the supplementary treaty, China agreed to
pay 400,000 taels as one-fourth of the expense of a temporary
occupation of Weihaiwei by the Japanese Army. But as
the terms of the treaty were perfectly fulfilled, and especially
as the payment of the indemnity was completed May 7, 1898,
this item of expense in connection with Weihaiwei became
unnecessary. After that date, of the items of expense. men-
tioned above, those for Formosa, according to the budget for
1896, were 18,489,811 yen in all, and these are explained in
detail below. The same amount has been appropriated each
year ever since.

Yen

Civil administrative expense 5,928,705

Defense expense 7,710,481

Extraordinary Formosan expense 4,850,625

But after 1897 the annual receipts and disbursements in
Formosa were turned over to a special account, with a view to
making Formosa self-supporting. A reform of the govern-
ment of Formosa was planned. The number of officials there
was reduced, some of the government offices were abolished
and some amalgamated, the ordinary administrative expenses
were economized, and at the same time, an increase in revenue
from Formosa was definitely anticipated. Further, new
local taxes were collected, thereby considerably assisting the
finances of Formosa. Consequently, the relief fund in the
Treasury for administrative expenses, which had amounted to
six million yen, as we mentioned before, was reduced to three
million yen in 1899. It was gradually reduced after that until
in 1 910 it ceased to exist. While therefore the ordinary
administrative expenses of Formosa were economized so that

EFFECTS ON PUBLIC FINANCE III

Formosa was being led on to self-support, at the same time
necessary enterprises in the new possessions could not be
neglected. So the government decided to carry out a con-
tinuation plan extending over seven years with a total ap-
propriation of 35 million yen for financing various enterprises,
such as (i) construction of railways, (2) investigation of land,
(3) construction of harbors, and (4) building new offices for
the government general. These will now be explained
further.

(i) A north-and-south railway in Formosa was considered
a necessity from the point of view of military and industrial
development. The government at first granted a permit to a
private concern. But as the work was not begun at once, and
there was no prospect that the railway would ever be built in
this way, it was necessary for the government to build the line
itself.

(2) The land in Formosa had never up to this time been
surveyed carefully, and land registry was in a complicated
condition. Besides, as there were the two systems existing of
large and small leases and other peculiar conditions attached
to the land, it was a very difficult task to establish a good land
system. Indeed such readjustment was impossible without a
careful survey.

(3) The harbors and bays of Formosa, with one or two ex-
ceptions, could hardly be recognized as such, and even in the
case of the exceptions, extensive work was needed to make
them safe places for ships to anchor. Now after Formosa
came into Japan's possession the number of ships coming and
going between Japan proper and Formosa steadily increased.
Not only so, but the Formosan trade gradually developed, so
that it became a matter of urgent necessity to reconstruct the
harbors and bays of the island in order to make them a safe
anchorage for ships. The water works and government
buildings also were of direct and indirect necessity in develop-
ing Formosa. The following table gives the amounts needed
for these various undertakings :

112 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Yen
Formosan railway construction and improvements . . . 28,800,000

Kielung harbor improvement 2,000,000

Temporary land survey in Formosa 3,000,000

New buildings for the Government General 1,200,000

Total 35,000,000

Table VI at the end of this chapter ^ shows the actual ex-
penditure made by the Treasury for Formosa for the chief
items.

The actual account for the guards at Weihaiwei was 917,-
677 yen in 1896; 855,588 yen in 1897, and 85,576 yen in 1888.

Besides the foregoing, the chief undertakings planned after
the Sino- Japanese War were improvement of water courses,
extension of educational plants, development of Hokkaido,
subsidy for harbor construction, establishment of agricultural
experiment stations and schools for sericulture, development of
foreign trade, erection of a hall for exhibiting goods for foreign
trade (after 1896), special forestry administration (after 1899),
improvement of live stock, investigation of sulphur mines,
establishment of industrial experiment station (after 1900),
also increasing legations abroad and extending the customs
service.

As the government thus launched out ambitiously in various
directions, the budget expanded enormously after the war.
The total amount of the ordinary and extraordinary annual
expenditure in 1 900 amounted to nearly 300 million 3;^^. Later,
when the extension of defenses and the other continuation
plan had been nearly completed, the annual expenditure for
these purposes was stopped and the extraordinary expenditure
was reduced. Yet before the Russo-Japanese War, that is, in
1903, the amount did not fall below 249 million yen. A part
of this increased expenditure was obtained from the indemnity
and a part from the bond issue, but the balance had to be
taken from the ordinary revenues of the government. On
that account an increase in taxes was several times required.
We shall now disclose in the following chapters the sources of
revenue for the foregoing various items of expenditure.

* Post, p. 146.

EFFECTS ON PUBLIC FINANCE

113

Bonds and indemnity

BONDS

(i) War Bonds — The bonds issued to pay off the expenses
of the Sino- Japanese War were the so-called war bonds. The
total amount of the issue was 124,920,750 yen, with net
receipts to the government of 122,437,687 yen. The
period of issue of these bonds stretched from September, 1894,
to November, 1896. The receipts from the bond issue were
used entirely for war expenses. As this has been already
explained we shall not repeat the details here. But below we
shall show the burden imposed upon the Treasury in conse-
quence of the bond issue.

Details of Bond Issue*

Fiscal year

Redemption of principal

Interest paid

Total

Face value

Amount paid

1894

1 8q 1^

Yen

....
8,339,300

940,300

2,235,200

4,889,300

108,516,650

Yen

8,001,558
912,255

2,151,128

4,986,746

108,739,883

Yen
78,223

2,937,055
5,431,824
6,082,643
6,206,077
6,094,789
5,819,049
5,825,219
5,785,426

5,779,344
5,774,769

5,792,879
5,701,388
5,779,263
5,674,934
5,677,813
2,721,485

Yen
78,223
2,937,055

1896

5,4';i,824

1807

6,082,643

1898

6,206,077

i8qq

14,096,347
5,819,049
5,825,219
6,697,681
5.779,344
5,774,769
5,792,879
5,701,388
5,779,263
7,826,062
10,664,559
111,461,368

1900 ...

1901 ....

1902

TOO';

TQOzl

TQo«;

1906

IQ07

1908

I QOQ

IQIO

Total

124,920,750

124,791,570

87,162,180

211,953,751

»A word should be said regarding the amount paid for redemption of the principal. The amount
paid was only 78,452,300 yen or the amount of the face value of the bonds reduced, by purchase and
exchange, by 46,339,271 yen. Thus the amount pa:id for redemption and the face value of the bonds
did not coincide.

The net receipts were, as before stated, 122,437,687 yen,
so that after all the amount paid in for redemption exceeded

114 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

the net receipts by 2,353,884 yen. The net burden to the
Treasury in consequence of the war bonds issued was therefore
this last figure, to which should be added 89,516,064 yen
for the interest payments, and, in addition, about 500,000 yen
for the cost of printing and preparing the bonds and also the
expense connected with making the redemption and interest
payments.

(2) Sundry bond issues in connection with the post-bellum
enterprises. When the government was casting about for
funds to finance the post-bellum enterprises, it decided to
secure such by the issue of bonds for productive enterprises,
as the building of railways and extension and improvement
of telephone facilities. In consequence, as we have seen, an
enormous number of bonds appeared, such as the industrial
bonds, the railway bonds, the Hokkaido railway bonds and the
Formosan industrial bonds, which were decided upon in 1892.

The industrial bonds were issued in accordance with the in-
dustrial bonds act, Law No. 59, promulgated March 29, 1896,
in order to secure a fund for various post-bellum enterprises.

The amount was at first fixed at 135 million yen and later
increased to 148,991,834 yen. This amount was apportioned
to various enterprises, as follows:

Nature of enterprises

Expense of improving government
railways already built

Expense of building Hokkaido rail-
ways (Sorachita to Asahigawa)

Expense of establishing an iron foun-
dry

Expense of extending telephone ex-
changes

Establishment of transaction office of

leaf tobacco and its operating capital

Expenses of army and navy extension

Army 18,459,484

Navy 58,999.423

Interest on bonds for the first year, . . .

Amount

Yen
26,553,000

1,178,330
3,516,031

12,802,102

12,213,550
77,458,907

1,278,080

Remarks

Afterward increased one
yen, i.e., 1,178,331.
Afterward changed to
18,622,932 yen, i.e., an
increase of 15,106,901
yen.

Afterward increased 5
yen, i.e., 12,802,107 yen.

Afterward 163,007 yen^
i.e., a decrease of 1,115,-
073 yen.

EFFECTS ON PUBLIC FINANCE 1 15

Law No. 93, promulgated May 13, 1896, for the building of
the Hokkaido railways, provided for the construction of the
line from Asahigawa, I shikari province, through Tokachida in
Tokachi province, and Atsukishi in Kushiro province, to
Abashiro in Kitami province ; a line from Ribetsu in Tokachi
province, through Ainouchi in Kitami province and Atsukishi
in Kushiro province, to Nemuro in Nemuro province; a line
from Asahigawa to Soya; a line from Uryu plain in Ishikari
province to Masuge in Teshiwo province; a line from Nayoro
in Teshiwo province to Abashiri, and a line from Otaru to
Hakodate; for all of which it was decided to issue bonds to the
amount of 33 million yen.

Next, the object of Law No. 4, for railway construction,
issued June 20, 1892, was to build to the limit of expenditure
of 60 million yen the Central, the Hokuriku, the Kokuyetus,
the Oou, the Sobu, the Joban, the Kinki, the Sanyo, the
Sanin, the Shikoku, the Kyushu and other lines. Laws, Nos.
II and 12, issued in March, 1895, revised Law No. 4, and added
more lines. As a result, the total amount of the appropriation
was changed to 94,844,459 yen.

The industrial bonds, the Hokkaido railway bonds, and the
railway bonds were turned over to special accounts by Law
No. 13, issued in February, 1899, providing for special ac-
counts for these three loans. Afterw^ards these bonds were
called the Imperial five per cent bonds.

The government now attempted to obtain a fund for
Formosan development expenses by issuing bonds. Law No.
75, of March 20, 1899, provided for the issue of Formosan
industrial bonds to the amount of 3,500,000 yen for the pur-
pose of building railways, surveying land, constructing forts,
and erecting government buildings. The foregoing four classes
of bonds may be summarized as shown in the following table.

By these immense bond issues, the government tried to
carry out the aforesaid plans for new enterprises within the
allotted time. But at that time the money market all over the
country was very much depressed, and in consequence it was
impossible to float these bonds. Therefore the money had to

Il6 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Class of bonds

First authorization

Subsequent substitute
authorization

Industrial

Yen

135,000,000

33,000,000

60,000,000

35,000,000

Yen

148,991,834

33,000,000

94,844,459
35,000,000

Hokkaido Railway

Railway

Formosan industrial

Total

263,000,000

311,836,293

be transferred either from the Savings Deposits Account of the
Finance Department, or from the Indemnity Account. But
in June, 1899, 10 milHon pounds sterling of four per cent bonds
in British gold were issued (issue price, 90 per cent commission,
4 per cent net receipts, 86 per cent); and later the money
collected in the Deposit Section, or bond redemption fund,
was utilized in order to prosecute the work intended to be
financed by the bond issues.

Relation of bond issues to the expense of said enterprises. —
We shall next consider the details of the amount needed for
enterprises, to be prosecuted by means of the money collected
by the issue of industrial, railway, and Hokkaido railway
bonds, in order to show the relation of the money collected
from bond issues to the total expenditure for these enter-
prises. At the end of this chapter are several tables showing
these details. Table VIP gives the revenue covering the
expenditures for Formosan development for the years 1896-
1903 and includes money transferred from the general account,
money transferred from indemnity, and money received from
bond issues; Table VHP gives the manifold purposes of the
industrial bonds for the same period, and Table IX^ gives the
ratio of actual expenditures for Formosan development, also
during the same period.

The following table will show the amounts of interest paid
on these various bond issues:*

1 Post, p. 147. ^ Post, p. 148. ^Post, p. 149.

* The Imperial 5 per cent bonds refer to the railway, the industrial and the Hok-
kaido railway bonds. The 4 per cent sterling bonds were that portion of the
Imperial 5 per cent bonds issued abroad.

EFFECTS ON PUBLIC FINANCE
Interest Paid on Bonds

117

Year

1 893-1 895.
1896

1897

1898

1899

1900

1901

1902

1903

Total.

Imperial

5 per cent

bonds

Yen

325,626
375.000
1,287,979
2,840,368
2,840,408
3,031,241
3,276,790
4,127,194
5,967,454

24,072,060

Formosan

industrial

bonds

Yen

39,215
160,812
347,283
443,018

990,328

4 per cent

British sterling

bonds

Yen

3,913,203
3,907,816

3,907,934
3,916,066

15,645,019

Total

Yen

325,626

375,000

1,287,979

2,840,368

2,840,408

6,983,659

7,345,418

8,382,411

10,326,538

40,707,407

The interest payments amounted to 40,707,407 yen. In ad-
dition, a certain amount of expense was incurred in transferring
money from one bureau to another account, or in borrowing
for the purpose of utilizing the money temporarily as capital.

Of the amount accounted for in the foregoing paragraph,
exclusive of interest payments on the bonds, the total between
the years 1896 and 1903 was 451,281,722 yen. The sources
from which it was obtained are as follows. It must be noted,
however, that the fractions of one yen were discarded, so that
the detailed figures will not coincide exactly with the total.

Amount transferred from the Yen Per cent Yen Per cent

general accounts 76,485,178 16.95

Indemnity transferred 174,875,542 38.75

Amount secured from bond issues :

Industrial bonds 138,846,215 30.77

Railway bonds 56,106,884 12 .43

Hokkaido railway bonds 4,967,900 i .10

199,921,000 44.30

As shown in the foregoing table, the percentage obtained
from the various bond issues to the total needed was 44.30
per cent, the balance having been transferred from the in-
demnity (38.75 per cent) and from the general account
(16.95 pGi" cent), but these bonds were not all issued at home.
About half of them, that is, 83,961 ,800 yen, were issued abroad.
Furthermore, the money which was not obtained abroad was

Il8 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

secured by transfer from the Treasury surplus or from special
account of the indemnity and applied to the prosecution of
various undertakings, as we have explained before in detail.
Thus, we should note that the funds for the chief ex-
penditure for the various enterprises undertaken after the
Sino- Japanese War were furnished by the indemnity and its
transfer and the importation of foreign capital. The success-
ful importation of foreign capital was possible, it is needless to
say, because the position of Japan in the world had been
raised by the Sino-Japanese War; but it was also due, we
believe, to the reform of the currency system. This currency
reform in 1897 was completed largely by means of the in-
demnity, as we shall explain elsewhere. When we consider
this matter, we should remember that the post-bellum enter-
prises had a very close connection with the indemnity. That
the government undertook these various aggressive post-bellum
enterprises at all was due entirely to the indemnity. Here
let us glance at the disposition made of the indemnity which
furnished so great a service to the post-bellum finance of our
country.

INDEMNITY

As a result of the Sino-Japanese War, an indemnity was
obtained from China for four purposes, namely, for war
expenses ; for interest on the deferred payments of the indem-
nity; for expense of guards at Weihaiwei, and for compensa-
tion for the return of the Liaotung peninsula.

The claim for indemnity for war expenses and for interest
on deferred payments was based on the Treaty of Shimonoseki
signed April 17, 1895, Article IV of which reads as follows:

China promises to pay to Japan 200,000,000 taels in Kuping silver as an indem-
nity for war expenses . . . against any unpaid portions of the indemnity
after date of first payment (that is the payment of 50,000,000 taels made within
six months after the ratification of the treaty of peace) interest at the rate of 5
per cent per annum shall be paid; provided, however, that China may at any time
pay the whole or a part of the indemnity in advance of the dates of payment; if the
whole of the indemnity shall be paid within three years after the ratification of the
treaty (or by May 8, 1898) all interest on the deferred payments of the indemnity
shall be waived, and the interest already paid up to that time shall be included in
the payment of the principal.

EFFECTS ON PUBLIC FINANCE

119

The claim for the indemnification of the expenses of the
guards at Weihaiwei was based upon Article VIII of the
Shimonoseki Treaty of Peace, as mentioned before, which
reads thus:

China agrees ta the temporary occupation of Weihaiwei in the province of
Shantung by the Japanese army as a guarantee that the terms of this treaty shall
be observed faithfully . . .

and also upon Article I of a separate agreement which stipu-
lates—

The size of the Japanese Army which shall occupy Weihaiwei temporarily in
accordance with Article VIII of the treaty signed today shall not exceed one Jap-
anese Army Corps. China agrees to pay 500,000 taels {Kuping silver) a year, as
one-fourth of the expense of the temporary occupation, beginning from the day
said treaty shall be ratified and copies exchanged.

The compensation for the return of the Liaotung peninsula
was based upon Article II of the treaty concerning the return
of that peninsula which was signed November 8, 1895, and
reads :

The Chinese Government agrees to pay to the Japanese Imperial Government
up to November 16, 1895, the sum of 30 million taels (Kuping silver), as a compen-
sation for the return of the southern part of Mukden province.

As the Chinese Government paid in full the entire amount
of the war-expense indemnity by May 8, 1898, as stated
before, the interest was waived in accordance with the terms
of the treaty, as explained before. Consequently, our country
received the following amounts as a result of the war:

Funds

In Chinese
currency

In Japanese
currency

Indemnity for the war expenses

Taels
200,000,000

30,000,000

1,500,000

Yen
311,072,865

44,907,499
2,380,103

Compensation for the return of the Liao-
tung peninsula

Expense of guards at Weihaiwei for three
years

Total

231,500.000

358,360,467
8,888,224

Interest for the use of the indemnity fund. .

Grand total

231,500,000

367,248,691

120 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

Considering the financial and economic condition of our
country at the time, the foregoing was indeed an enormous
amount, and provided funds for various undertakings after
the Sino- Japanese War, such as the improvement of the
national defenses and other enterprises; it also led to the
expansion of our annual budget. This is the reason why we
have presented here in such detail the receipts and expendi-
tures in connection with the indemnity and the effects of the
same upon our finance and economy.

Our government, in laying financial plans after the Sino-
Japanese War in reference to the indemnity, decided on the
policy of applying it to the redemption of the expenses of the
Sino-Japanese War, the extension of the army and navy, the
establishment of an iron foundry, an extraordinary reserve
fund, and a subsidy to the Bank of Agriculture and Industry,
thereby laying a foundation for extensive post-bellum enter-
prises. At the same time, the indemnity was placed under
"special accounts," and separated from the general accounts
of the government. We shall here enumerate the ways in
which the indemnity was used.

The amount available for various enterprises was 364,868,-
587 yen^ but the fund for the expense of the guards at Wei-
haiwei was from the first placed under "general accounts" and
was separated from the indemnity account for war expenses.

Enterprises for which Sino-Japanese War Indemnity was Employed

Yen
(i) Redemption of the expenses of the Sino-Japanese War 78,957,165

(2) Expenditure for army expansion 56,781,708

(3) Expenditure for naval expansion I39, 157,097

(4) Expenditure for establishing an iron foundry 579,762

(5) Extraordinary war expenses for the year 1897 and for trans-

portation and communication 3,214,485

(6) Transferred to general accounts for the year 1898 12,000,000

(7) Transferred to the Imperial Household 20,000,000

(8) Supplementary fund for warships and torpedoes 30,000,000

(9) Education fund 10,000,000

(10) Reserve fund for calamities 10,000,000

Total 360,690,2 1 7

Amount available 364,868,587

Amount employed for enterprises 360,690,217

Balance (transferred to consolidation fund of national bonds) . . 4,178,370

EFFECTS ON PUBLIC FINANCE 121

The details of the revenue and expenditures are shown in
Table X and XI at the end of this chapter.^

Of the foregoing, the amount used for the redemption of the
war expenses, that is, 78,957,165 yen, was certainly used in
accordance with the original purpose of the indemnity. Not
only so, but it had a very salutary effect in the prosecution of
the bond policy after the war. At first it was the plan to use
the indemnity received in 1895, amounting to 120 million yen^
for the first period of army and navy expansion. But at that
time there was urgent need of issuing bonds or borrowing to the
amount of 100 million yen for the special account of the Sino-
Japanese War, as this amount had to be secured before
March, 1896. Now, if the whole of the war indemnity
received had been devoted to the purposes of army and navy
expansion and the fund for the Sino-Japanese War expenses
had been obtained by means of bond issues, the major part of
the indemnity would have been buried in the Treasury for
three or four years, while all the time the bonds would have
been drawing interest — economically, a very wasteful arrange-
ment. Besides, it would not appear technically correct to
devote the indemnity obtained from China to expansion of
means of defense, without using any portion of it for the
redemption of the expenses of the Sino-Japanese War. Thus
the original plan was dropped and, as mentioned before, the
amount drawn from the indemnity, while the war bonds
were not issued, thereby adjusting the matter of the war
expenses. By these methods the load on the Treasury
and the danger of disturbing the financial market after the
war on account of such bond issue were avoided. So the less
apparent advantages secured by this change of policy must
not be ignored.

Now, regarding the 20 million yen presented to the Imperial
household in 1898, the government had already decided upon
it in a cabinet meeting and was about to introduce a bill to
that effect in the National Diet, when the Diet with a unan-
imous vote passed a resolution of its own accord to present

^ Fosl, p. 150.

122 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

this amount. This was an expression of the loyalty of our
nation to the Imperial household ; and the fact that the nation
did not spend for administrative purposes all of the indemnity
from the war, but presented a part of it to the Imperial
household in order to help toward perpetuating the glory of
the Empire, should be displayed in special type. In present-
ing it the govemrhent used consolidating bonds (face value
21,022,350 yen, market value 19,404,050 yen, and war bonds
(face value 645,450 yen, market value 595,905 yen), so that
these bonds helped the money market both directly and
indirectly.

The three funds of which this was the foundation, amount-
ing in all to 50 million yen, were as follows:

Item

Gold coin and
bullion

Imperial Government
bonds

Cash

Total

Amount

Face value

Fund for rebuild-
ing of battle-
ships and tor-
pedo boats . . .

Educational
fund

Reserve fund for
natural disas-
ters

Yen
15,041,827

Yen
14,958,173

9,999,989
9,999,989

Yen

a
10,775,850

10,775,850

Yen
II
II

Yen
30,000,000

10,000,000
10,000,000

Total

15,041,827

34,958,151

22

50,000,000

•Face value, £1,700,000.

The greater portion of these funds was in bonds. The
gold coins and the gold bullion, amounting to 15 million yen^
were deposited with the Bank of Japan with the understand-
ing that when the specie reserve should be reduced to 90
million yen, or when the government should have need, the
amount deposited should be returned to the government.
Thus it had a favorable effect upon the money market. Not
only so, but at the time of the Russo-Japanese War this

EFFECTS ON PUBLIC FINANCE 1 23

Special fund was transferred and used for war expenses,
thereby affording considerable assistance to the government,
which fact should be mentioned here.

The foregoing were the undertakings for which the indemnity
was actually used. But the influence of the indemnity upon
our finance and economy was not confined to these uses. It
has been skilfully manipulated to serve in many other im-
portant ways; for example, after it was received and until it
was finally disposed of, the balance in hand had a favorable
effect upon the money market; then again, in order to prevent
the outflow of our specie it was used as a reserve for exchange
transactions; then in 1898, when bonds could not be issued at
home, it was employed temporarily by a system of transfer;
and finally it has helped the finances of Japan directly and
indirectly by enabling the government to hold securities in
England. Thus, while it may be out of place to go into
detail regarding these matters in the present discussion, it is
perhaps important to add this explanation to maintain a
proper balance in point of relative importance of this and
other effects.

The first thing to set forth is the service of the indemnity
in assisting the establishment of the gold standard system.
Our country, as we shall explain later, ^ long since tried to
reform our currency system and to change from the double or
silver standard to the gold standard. In October, 1893, a
committee was organized to investigate the advantages and
disadvantages of such a change and earnestly to prepare for
it. But the government could not make the change for a long
time because the necessary gold reserve could not be secured.
When we received the indemnity from China after the Sino-
Japanese War it was arranged to receive the payment in British
gold. Therefore the specie and gold bullion in payment were
shipped here from England and our gold coins were minted from
this, thereby rendering practicable the plan of establishing the
gold standard. Here, however, we must explain clearly that

^ Infra, p. 159.

124 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

in executing this plan the indemnity itself was not used — the
coin was merely manipulated to produce this desired result.

Then again, the temporary balance from the indemnity ac-
counts was invested in securities, thus employing it for the
relief of the money market. This step had been highly con-
tributory toward the betterment of our finances. For
instance, in the first place, in March, 1899, war bonds to the
amount of 10 million yen were issued, but the result of the
subscriptions was not favorable, only 1,500,000 yen being
subscribed for. So 5 million yen out of the remainder of the
bonds was subscribed for at face value by the government and
later these war bonds were exchanged for the railway bonds
held by the Savings Deposits Bureau. The railway bonds,
together with the industrial bonds, were later called 5 per
cent bonds.

On January 21, 1898, both the industrial and the railway
bonds (face value 10,807,350 ^^ew, issue price 10,168,636 ;y^w)
were subscribed for on March 29 at a face value of 5 million
yen — issue price 4,510,500 yen. The stringency of the money
market after the war did not permit the issue of these bonds
in open market. Yet if this capital could not have been
obtained, the various undertakings would have had to be
postponed. Besides, difficulties in economic circles were at
that time increasing more and more. So the government, in
order to relieve the market and at the same time to manipulate
the indemnity successfully, decided to purchase 15 million yen of
the Hypothec debentures and 35 million yen of public loan bonds,
which were purchased at 96 yen per 100 yen of face value.

Of the foregoing, the subscription for the Hypothec deben-
tures was made to help extend the loans of the Hypothec Bank
of Japan and also to relieve the industrial concerns in Osaka
and other places which were in serious financial difficulties at
that time. The conditions of the government subscription
were that the government should take up the remainder of the
whole amount of the bond issue after the popular subscriptions
to the bonds had been taken into account, and that the in-

EFFECTS ON PUBLIC FINANCE

125

vestment of the capital should be confined to export industries
in Osaka, Kyoto and Tokyo, or to goods which would take the
place of imported articles. The actual result of the sub-
scription was as follow^s:

No.

Date

Total

amount of

loan

Private
subscription

Absorbed by
indemnity
accounts

Total
issue

I

2
3
4
5

April 11-22, 1898
April 25-28, 1898
June 8-13, 1898
Oct. i-io, 1898
April 1-30, 1899

Total

Yen
1 ,000,000
1 ,000,000
1,000,000
2,000,000
1 ,000,000

Yen

477,650

44,750

12,750

1,413,900

305,620

Yen

519,450
955,250
987,250
586,100
694,380

Yen

997,100
1 ,000,000
1 ,000,000
2,000,000
1 ,000,000

6,000,000

2,254,670

3,742,430

5,997,100

It is plain, therefore, that about 62 per cent of the entire
amount of the bond issue of 6 million yen was absorbed by the
indemnity accounts. Next, we shall note the circumstances
surrounding the purchase by the government of the bonds.
On April 15, 1898, for the first time an order was issued to the
Bank of Japan to undertake the purchase of the bonds. The
result was very successful, so that in October of the same year
the money market was gradually relieved and the interest
rate of the Bank of Japan was reduced. Therefore on October
10, the order to purchase the bonds was rescinded. The entire
amount of the bonds thus purchased at that time was 38,707-
770 yen (face value) the purchase price being 36,998,826 yen.

Again, on April 13, 1899, in order to raise the price of
bonds, the government decided to purchase an additional 5
million yen of bonds, and thereby succeeded in raising the
market price to the face value between April 21 and June i
of the same year.

We have so far described how the government purchased
the negotiable instruments for the purpose of relieving the
money market. We shall now show in the following table the
amount of the subscription by the government for these bonds
and the amount of purchase:

126 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

Government Subscription and Purchase of Bonds

Item

5 per cent bonds:

Face value

Purchase value . . ,
War bonds:

Face value

Purchase value . . .
Consolidated bonds:

Face value

Purchase value . . .
Navy bonds:

Face value

Purchase value . . .
Kinroku bonds:

Face value

Purchase value . . .

Total:

Face value

Purchase value . . .

Amount of
subscription

Yen
20,807,350
19,679.136

20,807.350
19,679.136

Purchase to
relieve
money
market

Yen
2,700
2,527

13,446,550
12,897,288

21,022,350
20,146,346

426,000
402,045

3,810,170
3.550.620

38.707,770
36,998.826

Purchase to

preserve

market

value

Yen

638,600
638,683

1.350.800
1,340,360

1,989,400
1,979,043

Exchange

with deposits

section

Yen
3,100,000
2,966.268

3.100.000
2,966,268

Total

Yen
23,910,050
22,647,931

14,085,150
13,535.971

22,373.150
21,486,706

426,000
402,045

3,810,170
3,550.620

64.604,520
61,623,273

Increase of taxes and development of
government monopoly

The expenses of the Sino- Japanese War were principally
met by the issue of bonds and the transfer of the indemnity,
thus rendering the increase of taxes in the main unnecessary.
But when the government expenditure increased on account
of various post-bellum undertakings, funds were secured by
increasing certain classes of taxes, by creating others, and
by establishing a monopoly on leaf tobacco.

An increase in the taxes took place twice after the Sino-
Japanese War. The estimated amount of revenue from the
increase was as follows: in the first period, from the fiscal year
1896, the amount was 33,576,293 yen; in the second, from
the fiscal year 1899, it was 40,346,875 yen; in all, 73,923,168
yen.

According to the first plan, a business and a registry
tax were newly established, a tobacco monopoly also, and
the sake tax was increased, while on the other hand certain
classes of taxes were abolished. The intention was to in-
crease the net receipts to over 26 million yen. The receipts
were estimated as follows:

EFFECTS ON PUBLIC FINANCE 127

Estimated receipts
Yen

Registry tax (new) (in force from April i, 1896) 6,423,993

Business tax (new) (in force from January i, 1897) 7.551.377

Sake tax (increased) (in force from October i, 1896) 9,284,544

Leaf tobacco monopoly (newly established) (in force

January i, 1898) 10,316,379

Total 33.576,293

Decrease from abolition of certain taxes 7.552,397

Balance 26,023,896

Later, at the time of the second increase, a tax on tonnage
was established, and other taxes were increased, in order to
obtain a total of 42 million yen a year.

Yen

Land tax (in force from January i, 1899) 8,475,958

Income tax (in force from April i, 1899) 1,494,516

Sake tax (in force from January i. 1899) 22,556,409

Tonnage tax (in force from August 4, 1899) 237,986

Registry tax (in force from April i, 1899) 1,846,759

Leaf tobacco monopoly receipts (in force from April i, 1899) , 2,145,550

Tax on convertible bank notes (in force from April i, 1899) . . 1,159,560

Soy tax (in force from March i, 1899) 1.598,387

License to sell tobacco (in force from April i, 1899) 831,750

Total 40,346,875

The entire increase for the two periods was roughly es-
timated at 73,923,000 yen. Comparing this amount with the
total amount of 156,552,359 yen from taxes, stamp receipts,
and the profits of the leaf-tobacco monopoly for the fiscal
year 1900, the year in which the entire actual amount of the
increased taxes was to be realized, the estimated amount as
mentioned above was about 50 per cent of the entire amount,
and compared with 74,697,624 yen, which was the amount of
revenue from taxes as actually accounted for in the fiscal year
1895, the year previous to the increase in taxes, it is seen to be
nearly the same as the entire amount of the tax revenues. We
thus see how extraordinary the increase in taxes was. For,
whereas in 1895 the amount of revenue from various taxes
classed as indirect was 34,507,661 yen, against the total
amount of revenue of 40,189,963 yen from the land and income
taxes classed as direct, in 1900 the indirect taxes amounted to
74,788,744 yen and the direct taxes to 59,137,351 yen. The

128 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

ratio of these taxes to the entire revenue from all the taxes
was as follows for 1895 and 1900:

Year

Direct

Indirect

1895
1900

Per cent
53-8
44.2

Per cent
46.2
55-8

We shall explain later what kinds of taxes were classed as
indirect, for we must note that these indirect taxes constituted
one cause of the extraordinary rise in the prices of commodities
after the Sino-Japanese War. We shall explain this point
more in detail, under the heading "Fluctuation in Prices" in
Chapter VIII.

We have thus briefly outlined the plan to increase taxes and
the results. The reason why taxes, increased once in 1896,
were, within a few years, that is, in 1899, again enormously
increased was because of the extraordinary increase in the
ordinary expenditure arising from the post-bellum enterprises,
the rise in prices consequent upon the economic changes made
after the war, and the various enterprises undertaken in
the newly acquired territories, since not only were there
limitations to the use of the indemnity but there were diffi-
culties in obtaining funds for ordinary expenditure, as the
market conditions of the country at the time did not permit
the sale of bonds. Naturally, these financial difficulties led
to frequent political quarrels and change of cabinets. The
national Diet was next dissolved so that the results just
stated could be brought about. Before briefly explaining the
newly established and increased taxes, we shall present the
annual financial status in outline.

We have repeatedly explained before that, in order to meet
the various expenditures required by the nation's develop-
ment after the Sino-Japanese War, and also to meet the ex-
panded administrative expenditure resulting from the rise in
prices of commodities and in the cost of labor consequent upon
the economic disturbances after the war, our country levied
increased taxes to meet the ordinary expenditure and trans-
ferred the indemnity and issued bonds to obtain financial

EFFECTS ON PUBLIC FINANCE 1 29

resources for the extraordinary expenditure. But as it was
expected that in the fiscal year 1896 there would be a deficit
of about 20,360,000 yen in the ordinary revenues owing to
various expenditures, such as those for the expansion of the
means of national defense, the payment of the principal and
interest on the war bonds, the Imperial grants of rewards, the
annual pensions, the expenditure for Formosa and for Wei-
haiwei, etc., and also that these various expenses would in-
crease thereafter, it was estimated that the amount needed to
supply the deficit in the annual revenue would be approxi-
mately 30 million yen. Hence as we stated before, a registry
tax and a business tax were newly established, a leaf tobacco
monopoly was instituted, and the sake tax was increased, so
that in all an increase of 26,023,896 yen from taxes was
secured. Although the increase in taxes was thus effected,
yet in that fiscal year the revenue from the registry tax
amounted to only about 2,720,000 yen (deducting the revenue
from abolished taxes). The deficit so caused was made good
by transferring an equal amount from the surplus in the
Treasury left over from the previous year, the government
being thereby barely enabled to balance the annual revenue
and expenditure. The next year, 1897, the budgetary item
for expenditure was also enormously increased. But, as the
increase in taxes had been effected in the previous fiscal year,
there was a revenue of 16 million yen from the increase (net
revenue about 10 million yen after deducting the revenue
from abolished taxes), and in addition a natural increase in
revenue from other sources; so that the ordinary revenue for
that year showed an increase of about 20 million yen compared
with the previous year, thereby enabling the government to
maintain a reasonable balance between the annual revenue
and expenditure. But until the succeeding year the entire
estimated amount of revenue from the increased or newly
established taxes could not be obtained. So the deficit was
supplied from the surplus in the Treasury and from a certain
amount transferred from the indemnity. But in 1898, owing,
on the one hand, to an extraordinary increase in expenditure

130 ECONOMIC EFFECTS Of THE SINO-JAPANESE WAR

(amounting to about 5 million yen) for the encouragement of
water transportation, the extension of shipping routes, and the
replenishment of the fund for various enterprises in Formosa
(amounting to about 10 million yen) and on the other hand, to
a decrease in revenue (amounting to about 5 million yen)y
because of the abolition of the tax on registry of population,
the decrease of the business tax, etc., there was again a deficit
in the ordinary revenue amounting to 21 million yen. There-
upon, the government tried to secure the entire amount or an
increase of 25 million yen from the land and sake taxes. But
the net revenue from increased taxes for the fiscal year 1898
amounted to only a little more than 8 million yen. The
revenue for this year included about 9,500,000 yen of the
increase in the land tax, but 170,000 yen were expended for the
collection of the revised sake tax, and 910,000 yen for the ex-
penses of land revaluation, while 330,000 >'ewwere estimated as
a decrease through the prohibition of home sake brewing. It
was planned to meet the deficit thus caused by means of a
loan. But at that time, the government — the Matsukata
Ministry — lost control of the political situation. The Diet
did not approve the ministry, and passed a resolution to that
effect. Thereupon the Diet was dissolved and at the same
time the bill to increase the tax was voted down. Conse-
quently, the only way to supply the deficit was to make use of
the indemility or temporary loans.

Thus, in a short time, the Matsukata Ministry fell, and
the second Ito Ministry was formed. The new Diet formed
after the dissolution was commanded to assemble May 19,
1898. In that year, as before stated, there was a deficit in the
annual revenue and the disparity between revenue a.nd ex-
penditure was great. As it was plain that this situation
would be continued into the following year, the government
again planned an increase in the taxes in order to be ready
to meet any emergency. It was estimated that the deficit
in the ordinary revenue would be 35 million yen as itemized
on the next page.

So, the government, to offset this deficit, tried to obtain an

EFFECTS ON PUBLIC FINANCE I3I

Yen

Sundry expenses In Formosa 11 ,240,000

Encouragement of water transportation and extension of shipping

routes 4,870,000

Redemption of bonds 7,000,000

Prison expenses paid out of Treasury 3, 550,000

Fund established for relief of sufferers from natural disasters 500,000

Interest on Chitsuroku bonds 460,000

Increase in the ordinary expenditure on account of the rise in prices . . 6,860,000
New enterprises on account of revision of treaties with foreign countries 2,550,000

Total 37,030,000

Excess of revenue i ,500,000

Balance (deficit in revenue) 35, 530,000

increase in revenue from the land tax of 17,550,000 yen, the
income tax of 1,640,000 yen, and the sake tax of 12,410,000
yen, totaling 31,600,000 yen. In addition, an increase was
planned from the telegraph serv^ices, 430,000 yen, from the
railway profits, 3,240,000 yen, totaling 3,600,000 yen, which
would bring the grand total of increase to 35,200,000 yen.
But the Diet considered it unreasonable to deliberate upon an
increase in annual revenue not accompanied by corresponding
expenditure. Therefore, the bill for revision of the land tax
regulations was rejected by a great majority on June 10, 1898.
The Diet was again dissolved, and the Ito Ministry fell on
June 30. The Okuma Ministry which succeeded also fell on
October 31 of the same year, on account of troubles among the
members of the party, and was followed by the Yamagata
Ministry.

In reviewing the budget for the year 1899, we find that the
revenue amounted to 188,738,437 yen and the expenditure
to 226,344,792 yen, the deficit in revenue being 37,606,355 yen.
The following are the principal items of increase in the or-
dinary expenditure which account for this deficit:

Encouragement of water transportation and extension of shipping Yen

routes 3,790,462

Sundry expenses in Formosa 12,121,597

Army expenses 1,275,310

Navy- expenses 3.578,368

Army expansion 5,140,798

Temporary repair of warships and torpedoes 440,432

Sundry expenses in connection with revision of treaties and execu-
tion of laws in practice 1,961,425

Sundry expenses for education 1,508,310

Increase in expenditure of various government departments 6,141,562

Total 35.958,264

132 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

There was also urgent need for effecting the payment of
prison expenses out of the treasury reserve and for establish-
ing a fund for the relief of sufferers from natural disasters.
For these purposes, the sum of 46 or 47 million yen was
required, but as the indemnity had already been allotted to
various uses, only a very small amount remained available.
As for a new bond issue, that was out of the question at this
time when the money market was so tight. But as the fore-
going items were practically of the nature of ordinary expend-
iture, a second period of tax increase was planned. Ac-
cordingly, the rates on land, income, sake, registry, convertible
bank notes, soy, and tobacco business were raised, the rate of
revenue from the leaf -tobacco monopoly was increased, and a
revenue from postoffice and telegraph service was planned,
amounting in all to 42,020,219 yen. These taxes have been
discussed before, but we may here mention the fact that in
anticipation of the proceeds to result from the new tax law the
deficit in the annual revenues was made up by a transfer of a
part of the indemnity. The first increase in taxes yielded
33>576,293 yen additional revenue, the second, 42,020,219
yen, a total of 75,596,512 yen. But in the early part of 1900
the Boxer troubles occurred in China and on June 26 of the
same year Imperial Emergency Ordinance No. 277 was issued,
authorizing the government to use, for the Boxer punitive
expedition, a part of the three funds which had been estab-
lished with the indemnity obtained from China, viz., (i) for
building warships and torpedo boats, (2) for meeting emer-
gencies from natural disasters, and (3) for promoting education.
Before the end of 1900, 28 million yen from these funds had
been employed for the aforesaid purpose. Accordingly, in
1 901, an attempt was made to repay the Boxer expenditure
and reimburse these three funds by raising the taxes on sake
and sugar and raising, or at least regulating, the customs
tariff rates, since it had been decided to replace revenue
raised from bond issues with that raised from taxation. It
was decided to raise additional revenue from the leaf-tobacco
monopoly also. The bill to increase the taxes was vigorously

EFFECTS ON PUBLIC FINANCE 133

Opposed for a time by the House of Peers. But after an
Imperial order had been issued, the bill was successfully passed,
and the various bills as passed were put in force from October i ,
1901 . As stated before, the increase in taxes for the year 1901
was planned principally for the purpose of repaying the ex-
penses of the Boxer war. But as the expenditure of the
money thus raised was not confined to this, a further increase
soon became necessary. Such were the evil effects of the
post-bellum enterprises. We shall here tabulate the increase
from the various taxes as follows :

Yen

Beer tax 229,047

Revised tarifT regulations 141,374

Sugar consumption tax 2,718,867

Leaf-tobacco monopoly price changed 3,204,287

Total 6,293,575

This increase amounted to about 6 million yen so that the
whole increase reached about 82 million yen. We shall leave
the detailed explanation concerning the foregoing various
kinds of taxes to the volume dealing with the investigation
of taxes and shall here confine ourselves to saying a few
words concerning the development of government enterprises.

After the Sino- Japanese War, the newly planned or ex-
tended government enterprises were the tobacco monopoly,
the railways, the iron foundry, and the post and telegraph
offices. The reasons for starting said enterprises were as
follows: The iron foundry was considered indispensable
for defense purposes, the extension of the railways was planned
in order to develop the wealth of the nation, and as to the
reform in the regulations for postal and telegraphic service
and railway freight made in the year 1899, this was made for
quite other purposes than the replenishment of the annual
revenues. The leaf-tobacco monopoly, on the other hand,
was started altogether for the replenishment of the annual
revenues, and was the first of the monopolistic enterprises
undertaken by Japan.

As we have already briefly described the iron foundry in
discussing the extension of national defenses, and shall

134 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

explain the extension of railways in Chapter VI, we shall here
dwell chiefly upon the leaf-tobacco monopoly.

The leaf-tobacco monopoly is especially notable for two
reasons, first, because out of the entire budget the amount
secured from its revenues was the largest in the financial
program hurriedly formulated after the Sino-Japanese War^
(in the first period of tax increase, 10,316,379 yen; in the
second period, 2,145,550 yen, total 12,461,929 yen), and
second because with its institution the monopoly system was
first established as a government enterprise. It may indeed
be proper to discuss the subject here as one development of
government enterprises; but especially because it belongs to
the class of consumption taxes, it is explained here.

The leaf-tobacco monopoly was established to replace the
stamp tax on manufactured tobacco provided for in the
tobacco-tax law of 1876. The annual revenue from the
stamp tax had been very small, in 1876 amounting to only
80,000 yen. Later, it increased to between 50,000 yen and
60,000 yen for about seven years. In 1884, as a result of the
revision of the law, the revenue reached approximately 1,000,-
000 yen, and after the revision of 1889, between 1,500,000
yen and 2,300,000 yen. But if the rate of a tax be raised the
tax is liable to be dodged and the object — to secure an increase
in revenue — frustrated. Thus the tobacco monopoly came
to be established, with the object of controling the sale
legally. The government was to supervise the raising of
tobacco, and the tobacco raisers to secure a special permit
from the government to raise tobacco and to sell the crop to
the government, after inspection, before harvesting or after
the crop had been dried. They were not permitted to dispose
of this to private parties or to consume it privately, and the
government, after purchasing, was to sell to the tobacco
manufacturers, thereby securing a margin of profit. This
plan was executed from January i, 1898, in accordance with
Leaf-Tobacco Monopoly Law No. 35, promulgated on March
27, 1896.

^ Article 12, Leaf-Tobacco Monopoly Law No. 35.

EFFECTS ON PUBLIC FINANCE 135

To be more specific, the government had the privilege of mo-
nopolizing the sale of all the leaf tobacco produced but must
sell the produce at a fair price, the producers being required to
report their products to the government. The produce left
over in the hands of the tobacco manufacturers before January
I, 1898, which was the date of the execution of the new law,
was to be governed by the tobacco tax law in force before that
date. But at that time, the import tariff rate of our country
was very low in accordance with the old treaty stipulations,
so the importation of foreign tobacco increased considerably;
the more so as the direct exportation of leaf tobacco was
permitted to the producer without first selling it to the
government.^ Unscrupulous merchants often took advantage
of this right and thus the desired result of the monopoly
system could not be obtained. Therefore, on January i , 1899,
the tariff law was reformed and the existing evils removed, as
by Law No. 28, issued on March i, 1899, the government was
to buy or import leaf tobacco. Again, the manufacture of
tobacco or the monopolistic sale of leaf tobacco was permitted
to those securing a license issued on payment of a fee (in the
case of manufacturers, 50 yen each for manufacturies, and 50
yen each for dealers). This was done to increase the revenue
by raising the rate.

The government, as a basis for estimating the profit from
the monopoly, fixed the average price of manufactured
tobacco throughout the country in 1894 ^^ 22 sen per 100
momme (i momme=^ 58 grains troy). From this four sen, four
rin, and two mo of stamp tax was deducted, so that the net
market price was fixed at 17.58 sen. Since 100 momme of
manufactured tobacco requires 145.56 momme of leaf tobacco
as material, at the aforementioned market price 100 momme
of leaf tobacco would be worth 12.137 •^^^- The rate of
revenue for the government from this was fixed at 35 per
cent so that the amount of revenue for the government
was 4.248 sen. But the average selling price of leaf
tobacco by the growers was fixed at 5.084 sen per 100

^Article 12, Leaf-Tobacco Monopoly Law Xo. 35.

136 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

momme. The following table will show the basis of monopoly
prices :

Sen

Profit of the treasury (35 per cent.) 4 . 248

Commission for brokers for transportation (i i percent.) i .026

Sundry manufacturing expenses (about 20 per cent.) 2 .000

Profit of the manufacturers and of the dealers (33 per cent.) .... 4 • 027

Total 1 6 . 385

If this total is compared with the price of leaf tobacco, that
is 12.137 ^^f^i to which the stamp tax of 3.034 sen must be
added, making a total 15. 171 sen, it will be seen that as a
result of the tobacco monopoly established by the government
the market price would become higher by about 1.2 14 sen.

Now, according to the estimate of the government, the
entire production of leaf tobacco throughout the country
amounted to 24,285,260.182 kwan^ and at the rate of 4.248 sen
of profit per 100 momme for the government, as per the fore-
going table, the revenue of the government, it was estimated,
would be 10,316,379 yen. But the actual results of the
monopoly did not come up to this estimate, as will be shown
below. In the year 1901 the profits of the government
amounted to 10,866,699 y^^^ but if we remember that the rate
of profit then was 150 per cent, we may realize what the
situation was.

The annual amount of leaf tobacco produced throughout
the country for several consecutive years was as follows :

Amount
produced

Amount
received by
government

Price paid by
government

Price per

kwan

iSoS

Kwan

8,280,882
13,714,724
13,315,291

8,484,374

8,349.505
11,506,790

Kwan

8,177,711
13,493,327
13,309,991

8,626,506

8,430,071
11,474,249

Yen
5,967.625
8,039,214
7,720,610
5.792,281
6,123,339
8,660,353

Yen
o.7';o

1 800

0. sq6

IQOO

0. s8o

IQOI

0.671

1902

0.726

190-1

o.7S«5

Total

63.651,566

63,511,855

42,303,422

I kwan = 8{ lbs. av.

EFFECTS ON PUBLIC FINANCE

137

Now the rate of revenue was based upon 84 per cent of the
purchase price paid (the monopoly on imported tobacco was
commenced from 1 899 and the purchase price was based upon
the same). Later, from July, 1898, to August, 1900, the
rate increased to 100 per cent; from August 22, 1900, to 130
per cent; in the year 1901 it was 150 per cent; and in the year
1902 between 140 and 180 per cent.

The amount and the percentages of profit are given below,
in a table which will show that the estimated revenue was at
last obtained in the year 1902.

Expense of

procuring leaf

tobacco

Profit

Percentage of
profit

1897-..
1898. ..
1899...
1900. . .
1901 . . .
1902. . .
1903 • . .

Total

Yen

375,005
5,867,618
8,040,416
8,221,584
6,840,999
6,921,933
9,743,213

Yen

292,141

5,145,999

7,559,533

7,244,159

10,868,699

12,367,569
14,898,291

Per cent

77.9

86.2

94.0

88.1

158.8

178.8

152.9

46,010,768

58,376,391

126. 87»

» Average.

Now, at the time of the increase in taxes, in 1902, it was
planned to obtain 1,673,344 3^^^ from the post and telegraph
revenues; while the direct object was not to replenish the
annual revenue, yet the change in the telegraphic rate and the
railway fare produced an increase of over 2,200,000 yen in the
annual revenue. With this increase, telegraphic apparatus
was increased, wires were extended, and the means of com-
munication were otherwise improved in order to help the
development of the government enterprises.

Local Finance

As the finance of the central government expanded after
the Sino-Japanese War, so the expenditure of the local
governments for educational and industrial development
expanded proportionately, to keep pace with the national

138 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

development. The following table will show the general
increase in the annual expenditures of prefectures, cities,
towns and villages, which are the local self-governing units of
our country.

Increases in Annual Expenditures of Prefectures, Cities, Towns and

Villages

Fiscal year

Prefectures
(Do, Fu, Ken)

Cities

(Shi)

Villages
(Cho and Son)

Comparison
annual ex-
penditure from
national
treasury

iSo't

100. 0
106.0
lOI .2

129. 1
163.4
170.3
197.8
212.3
219.6
236.8
245.6

100. 0
114. 8
138.8
176.8
235-0
250.8
343-2
435-6
506.1
593-0
589-7

100. 0

IIO.O

119. 7

134 -3
170.2

193-5
223.3
263.0
296.6

311-5
316.4

1 00.0

1 804.

92.4
100.9
199.9
283.4
259-8
300.5
346.1

315-5
342.0

295-1

i8q«;

1896

1807

1898

1 800

I QOO

IQOI

I Q02

190'^

As shown in the foregoing table, the expansion of the
finance of the local government was much the same propor-
tionately as that of the nation. In the case of cities the
percentage of increase was especially great. The table on page
139 will show the percentage of various items of expenditure
of the local governments to the total and also the percentage
of increase in the expenditure in the year 1904 compared with
that of the year 1895.^

The table on page 139 shows that of the various items of
expenditures, those for construction and for the police in
prefectures, those for construction, education and bond issues
in cities, those for construction, education and offices in towns
and villages, amounted to enormous sums. It shows, again,

^ In the annual expenditure, prefectural expenses for sanitation are included
among other items, also the prison expenses were turned over to the national dis-
bursements, in the year 1902. The administration of the police and the prisons is
a governmental work and does not belong to the incorporated local communities,
so that these expenses of administration do not appear in the expenditure of cities,
towns and villages.

EFFECTS ON PUBLIC FINANCE 1 39

Ratio of Expenditures of 1904 and Rate of Increase over 1895

Prefectural
expenditure

City expenditure

Town and village
expenditure

Percentage

Rate of
increase

Percentage

Rate of
increase

Percentage

Rate of
increase

Police

16. IS
31.55
12.30

2.90

6.79
3.88

26.70

101.2
148.9
659.1

813.0

419.4
102.9

14.32
22.05

0.36
4.81

13' S3
8.49
0.S8

35.87

721.6
385.9

257.4
795.3

80s. I

278.4

58.7

427.5

16.51
35.82

1. 21
5-94

23.16

1.08

10.63

48.0

Educational

250.1

Encouragement of in-
dustry

504. 1

546.6

Prison expenses for pre-

Bond issue

1,269.4

Office

112. 0

Conferences

62.3

Other

979.2

Total

100.00

145.6

100.00

489.7

100.00

216.4

that the percentage of increase was especially remarkable in
educational, industrial, sanitation and bond-issue expenditure.
This shows how the local governments have been endeavoring
to improve education and to develop wealth to keep pace with
the central government and help in the advancement of the
nation. It was indeed in keeping with the general tendency
to encourage the post-bellum enterprises of the nation.
Table XII at the end of this chapter^ shows the percentage of
increase in educational, sanitation, industrial and bond-issue
expenditure.

The expenditure for education mentioned in the foregoing
table refers to that of local communities, that is, for public
schools and the general education of the people. The ex-
penditure for sanitation was for preventing disease, for
disinfection, and for arrangements for public sanitation. The
expenditure for encouragement of industries was made to
encourage agriculture, industry and commerce. All these
were calculated to help conserve and increase the national
power, but appeared in the local government budgets only in
connection with the post-bellum enterprises of the nation.

As for the direct financial effects of the war, there must
have been various items of expenditure, such as the expense of

^Post, p. 151.

140 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

farewell receptions for the soldiers who went to the front, the
relief of the survivors of the dead, and other similar items,
which would have increased the expenditure considerably.
But the exact data are lacking and, besides, the patriotism of
our countrymen, their enthusiasm to serve their country, the
ardent desire of the people to relieve their own relatives, have
created the sentiment that it is a great honor to die at the
front and have lessened the burdens of the local government
in relieving the survivors of the dead, so that it will not be
far wrong to state that the expenditure for these purposes did
not burden the local governments very much.

EFFECTS ON PUBLIC FINANCE

141

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10 fo

0 00

c< ts

On

r<

10 rt-

i-«

c«

lO«-«

W t^

10

§.

X

u ci
Oh C

C< O O OooOvO*-" coooi>.iOO

M 00 O OntJ-oOOO VO rOOO (>< vO
VO O O O ON M CO VO Tl- c< ON ON

VO CO

CO

Ti-vO

00

- - 00

d"vo" CO vo"

0\ 1-1 t-i r>.

C^^ CO •^ P*^

hT 00 oo" fi

10 i-i i-i

1010

10 Ov

cOOv

o" to

u a
o

»0 t}- • VO M HI On

r^ CO • HI vd 10 W
CO vO • n >OvO

O 00
VOOO
Tfvo"
100

VO

to

fl to

•08

tn u,
C <U
rt C

C< U-) O ON

°5-

VO

a o

►^ o

CO r^ (N vO

Tl-O t^co

cooo_ t^"2

hTvo" 00" Th

O VO 10

t~>. W CO

vO
vO

.-. VO
CO t^

t^vO

VO -^

CO 00

w

150 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Table X. — Revenue for Post-bellum Enterprises and Annual Balance

Compensation

Fiscal

War expense

for return of

Total

Amount

year

indemnity

Liaotung
Peninsula

increase and
decrease

revenue

expended

Yen

Yen

Yen

Yen

Yen

Yen

1895...

74.143,054

44.907.499

93.624

119,144.177

78,957,165

40,187,012

1896...

83,719.110

911.652

84,630,762

11,789.389

113,028,385

1897. ..

34.869.189

7.071.097

41,940,286

40,360,796

114,607,87s

1898...

118,341.511

1,341.450

119,682,961

66,187,071

168,103,76s

1899. ..

....

311.277

311,277

82,636,90s

85,778,137

1900 . . .

661,313

661,313

31,240,140

55,199,310

1901 . . .

....

1.705,783"

1,705,783*

20,883,427

32,610,100

1902 . . .

155,337"

155,337"

13,866,937

18.587,826

1903. .

....

147,073

147,073

9,514,215

9,220,684

1904. ..

....

57,849

57,849

3.544.375

5.734,158

1905...

154,009

154,009

1,709,797

4.178,370

Total

311.072,864

44,907.499

8,888,224

364,868,587

360,690,217

4.178.370

» Decrease.

Table XI. — Expenditures for Post-bellum Enterprises

Redemption

Extraordi-

Amount

of Sino-Jap-

nary war

anese War

Estab-

expendi-

transferred

Fiscal

expenses.

Army

Naval

lishment

ture and

to the Im-

year

and transfer

expansion

expansion

of iron

expenses of

perial house-

Total

to General

foundry

communi-

hold and to

Accounts

cation

various

Fund

bureau

funds

Yen

Yen

Yen

Yen

Yen

Yen

Yen

189s...

78,957.165

....

....

....

78.957,165

1896...

7,588,356

4,043,729

157,304

11,789.389

1897...

....

16.193,396

20,633,455

383,156

3.150,789

40,360,796

1898...

I2,000,000«

8,932,554

25.151.519

39.302

63.696

20,000,000^

66,187.071

1899. . .

....

6,053,980

26,582,925

50,OO0,000<=

82,636,90s

1900,. .

....

8,121,594

23,118,546

....

....

31,240,140

1901.. .

....

5,346.896

15.536,531

....

20.883,427

1902. . .

....

3,083.189

10,783.748

....

....

13,866,937

1903..

1,258,552

8,255.663

....

9,514,215

1904...

....

94,431

3.449,944

....

....

3.544,375

1905...

108,761

1,601,036

—

1,709,797

Total

90.957,165

56,781.709

139,157,096

579.762

3,214,485

70,000,000

360,690.217

• General Accounts Fund.

^ Imperial Household.

« Various Funds.

EFFECTS ON PUBLIC FINANCE

151

1

1

c
W

Towns

and
villages

0 rt-fOt^iOl^- 0N0MC»O
0 « rfr<v£) roc «00 00
HI i-i HH «s 10 fO Tj- 10\0 00 Ov

1^

• -CTj-aNosovooof^ov

• •00M0^^^t^f00►^

tn

•c

.s

'i

c

2

3

8

c
W

Towns

and
villages

0 n H^ 00 r'JOO ■^ tJ- 1000 0
hiHHi-icsvOrOrJ-iO t^vC sO

1

i-T i-T J" ri cT

is
i3

1-1 1-1 M N C< rOro>Ot>.CNCN

il
fi

X

W

Towns

and
villages

OvOtiONClNOOi-ClvOTl-

<-i M ^ ro ""i- 1^ q_ q_ c^oo vo

1

U

0 Tj-ONt^OOMOrOfOO 10
0 i-i (N OMOOO n 0 ONONO
•-I i-« cj i-i N (S rf-r^oo O_oo

c
.2

3
0)

3

'"O

c

Towns
and

villages

0 Th\0 lO^H lOOThC ON©
0 0 !-> fO^ 00 M f^ re Tt- 10
HHi-ii-ii-iHHhH(s(StOrOcO

en

0 rOiOvO fOt^OO rOO fOvO
0 t-H H- rhO r« OvvO C< Tl-oo

C^O^CT^O^C\0^0^0 O O O

OOOOOCOOOCOOOO CNONOC>

CHAPTER III
EFFECTS ON THE MONEY MARKET

At the time of the Sino-Japanese War, our economic world
bore the burden of war expenses amounting to about 236
million yen and met the issue of 100 million yen of war bonds.
Such an enormous bond issue — and during war time too —
had never been heard of before in Japanese history. So the
government was careful not to burden the people too heavily,
and by employing the Bank of Japan devised a suitable and
effective financial policy whereby financial circles were enabled
to pass quite tranquilly through the war.

When diplomatic negotiations between Japan and China
assumed a serious aspect, in June, 1894, financiers and econ-
omists entertained grave anxiety. To understand the situa-
tion we must realize that the financial policy of the government
at that time was to prevent stagnation in the circulation of
capital by restricting the construction of railways. So the
Bank of Japan raised the loan interest rate on June 18, 1894,
from 1.9 sen per diem (6.935 per cent per annum), which had
been the rate in force from February 8, 1894, to 2 sen per diem
(7.3 per cent per annum). The economic world was struck
with terror; for, be it remembered, war with a foreign country
was something of which the people of Japan had only read in
books on history and of which they had not had the least
direct personal experience. They were profoundly disturbed
by the idea of crossing arms with China — a great nation
hoary with age — and feared they knew not what great
economic convulsion. The banks throughout the country
called in their capital, restricted their loans, and were anxious
only to protect themselves; the industrial world, expecting a
decrease in the demand for goods during the war, restricted
production; the people turned their attention altogether to
economy, and commerce shrank; then, again, the Chinese
residing in Japan, fearing that as a result of the opening of

152

EFFECTS ON THE MONEY MARKET 1 53

hostilities paper currency might greatly fall in price, would not
accept anything but silver in payment, and demanded a
premium of i| per cent on paper currency — so great was the
apprehension felt by economic circles !

But when the war began and arms were actually crossed
between Japan and China, the Imperial Japanese Army at
once won a great victory and there was strong confidence in
the minds of the people that the final outcome would be
favorable to Japan. This restored confidence in the money
market, which then became very firm. When the war bonds
were issued, the people were moved by patriotism and the re-
sult of the popular subscriptions to the bonds was very good.
The interest rate was very low, only 5 per cent, and this had
a great effect in quieting the market, because at that time
financiers had an idea that if the interest rate on the bonds
was very high, general interest rates would become high also.

As had been explained before, the whole financial world
was seriously shaken up at the commencement of this inter-
national war and at the same time the people in general were
deeply influenced toward economy, so that with the exception
of the articles of daily necessity and war materials, the de-
mand for merchandise decreased considerably. Then again,
owing to the dislocation of land and water transportation
facilities on account of the pressing need of transporting
troops and war materials, the accumulation and disposition
of commercial articles was hindered and consequently the
operation of capital was affected seriously. The prices of
daily necessities and also of war materials rose at the places of
consumption. So commerce experienced great depression
and the demand for industrial capital decreased greatly. How-
ever, foreign vessels were chartered, and by this means the
defect in water transportation facilities was remedied and the
circulation of money greatly facilitated. These steps helped
somewhat in restoring commercial prosperity.

Furthermore, as regards foreign trade, it was at first ex-
pected that trade with China and Korea would be most
seriously affected. But the government devised various

154 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

means of relief for the China trade, and furnished the needed
financial facilities, so that the dislocation of trade proved to be
only temporary. After our country had secured control of
the sea, especially, the China trade did not suffer seriously.
As for trade with Korea, no bad effects from the war were
felt there, either, after navigation was made safe. The
American route was from the beginning perfectly safe and
European trade suffered no ill effects at all. Both routes
being free from disturbance, a tendency toward constantly
increasing development was shown.

While there was thus no particular disturbance to com-
merce either at home or abroad, the currency, affected by the
war expenditures, was gradually inflated, as is shown in Table
I at the end of this chapter.^

Thus on the restoration of peace (April 30, 1895), compared
with conditions at the beginning of the war (June 30, 1894)
there was an increase of about 44 million yen and on December
31, 1895, of about 85 million yen. This inflation of the
currency was caused by an increase in the issue of coins and
paper currency and by the payments made from the Treasury.
These were results of the war expenditure, for this expenditure
of about 200 million yen was made with various kinds of
specie, while the government, as one of its financial measures
during war time, spent the money at home as much as possible,
so that naturally coin and paper currency increased consider-
ably. The following table will show the facts as to the in-
crease of convertible notes out of paper money.

Date

January 31, 1894

June 30. 1894

December 31, 1894

January 31, 1895

April 30, 189s

December 31. 1895

Comparison with June 30, 1 894

December 31, 1894

December 31, 1895

Bank-note

Specie

Reserve

Extra limit

issue

reserve

securities

issue

Yen

Yen

Yen

Yen

147,372.199

84.515.404

62.856.795

141.736.358

79.632.988

62,103,370

....

149.813,700

81,718,291

68,095.409

4.197,549

142.756,092

80.924,075

61,832.017

....

132,839,984

68.532.320

64.307,664

180,336,81s

60.370,797

119,966.018

55,083,148

8,077,342*

2,085,303'

5.992.039'

5,499.640*

38,000,457'

19.262,191''

57. 862,648'

56.385.239'

Reserve

power of

issue

Yen

299.973
1,302,091

2,547.265
7,618

^Post, p. 196.

• Increase.

*> Decrease.

EFFECTS ON THE MONEY MARKET 1 55

Judging from the foregoing table, we find the specie re-
serve was not greatly afifected during the war. Even in the
securities reserve there was a certain amount of reserve
strength of issue left, so that the financial condition for war
time was excellent. After the war the specie reserve
rather decreased, and the extra-limit issue was effected; for
the effect produced on the securities reserve issue during this
period was due to the increase or decrease of the specie re-
serve as the case might be. The decrease of an enormous
amount of specie reserve after the restoration of peace was
altogether due to (i) the payments in silver made for war
expenses, (2) the paying out of convertible notes, as these were
especially demanded by the Chinese merchants, and (3) the
unfavorable balance of foreign trade. Aside from these facts,
the general condition, as to deposits and loans, of the Bank
of Japan and the private banks, as well as the interest rate,
remained normal, as we shall explain later; so that except for
the precautionary attitude which was taken during war time
there was nothing particularly noteworthy in the situation.

Thus we see that during the war finances were in an un-
usually normal condition. To be sure, an enormous amount
of money was spent for the war without any return and 200,-
000 men were called out of productive industries to the front,
thereby restricting the productive power of the nation and
causing a change in the industrial order, so that it was im-
possible to prevent economic changes later, the seeds of which
were indeed germinating during the war. Nevertheless it is a
fact that conditions similar to those of peace were maintained
during war time. The following may be given as the principal
reasons why this was possible :

(i) The war itself was a stimulus to the minds of the people,
and a potent cause in producing thoughtful, conservative
action. We have noted at first how excessive precautions
were taken, how the money market at once became tight,
demand for capital decreased, owing to fears as to the financial
future, and idle capital increased, because owing to the pre-
cautions of business men lucrative ways of disposing of it

156 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

could not be found. All these things helped to prevent the
expected panic in the money market. In other words,
money circulation shrank not from real necessity but for psy-
chological reasons.

(2) The financial policy of the government was duly
carried out, since (a) stagnation of capital for railway enter-
prises was prevented, (b) interest on bonds was lowered, (c)
special attention was paid to the collection and circulation of
the funds secured from bonds, (d) suitable steps were taken
for facilitating commercial transactions.

(3) The activity of the Bank of Japan was altogether be-
yond that necessitated by the consideration of immediate
profits for herself, having for its object the securing of the wel-
fare of the nation. Loans were restricted or bonds redeemed
and at the same time the fund secured by bond issues was fur-
nished to the people for their use, and the government was
supplied with capital as loans to meet the urgent need of war.
On the other hand, the convertible notes were controlled and
the interest rate was preserved from fluctuation.

(4) Besides the Bank of Japan, the influential banks of
Tokyo, Osaka and other cities, in order to facilitate the
circulation of money in war time, cooperated with the Central
Bank in facilitating the issue of bonds, or subscribed for the
bonds themselves and restricted their loans, in order to pre-
vent the equilibrium of financial circles from being disturbed.

(5) The nation expected that, as a result of repeated
success at the front, the final victory would be with Japan.
The minds of business men were set at ease and there was no
further anxiety entertained as to money circulation for the
future.

These various reasons combined to quiet the money market
in time of war. But this was only a temporary phenomenon.
As has been said, the extraordinary financial conditions after
the war were being germinated during the war. These
conditions led to frequent fluctuations after the war which
were only relieved just before the Russo-Japanese conflict.

When the Sino-Japanese War, the only international war

EFFECTS ON THE MONEY MARKET 1 57

Japan had waged since the Restoration, ended in a glorious
victory for Japan, and an enormous indemnity was obtained
and the Liaotung Peninsula and Formosa were ceded to us,
the Japanese nation first became conscious of her real strength,
and various important national movements then had their
inception. In the world of thought, the idea of " Japanism,"
as it was called, was cherished; in the economic world the
former pessimism gave place to optimism; while an increase
in extravagance together with the gendering of a spirit of
enterprise were the results of these national movements.

But before this stimulation produced any substantial re-
sults, the interference of the European Powers in the
peace negotiations with China came suddenly, dealing a
severe blow to the nation. The optimism which had just
been expanding was altogether subdued. We shall not take
the time or trouble to describe this interference, as it is already
a fact well known to the world. Just how it enraged our
nation may be realized by recalling the fact that the NihoUy
a daily newspaper edited by Dr. Yujiro Miyake, a noted
critic, reported the news of the return of the Liaotung Penin-
sula to the people by issuing an extra headed with these
words "Urgent Imperial Message has been issued." . . .
"Who that has red blood in his veins will not read it with
tears?" And the forty million people affected did indeed
look at this unjust interference with bloody tears. The
Taiyo, a political review, under the title of "Patient, Watch-
ful Waiting," said: "We must repay the good will of the
Three Powers, as we are not a nation who would forget the
favors of others." Thus the so-called "Patient, Watchful
Waiting " and the " Ten- Years' Plan," became the watchwords
of the time and gave the people the opportunity to reflect.
These watchwords were in keeping with the national move-
ment which was started by the war and led to the realization
of the plan of a big army and navy and of replenishing the
nation's wealth; thus a heavy burden was laid upon the people
owing to the expanded financial program of the government.

However, the depression in economic circles caused by the

158 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

retrocession of the Liaotung Peninsula did not last long. The
national self-realization, which resulted from the victory,
materialized in the world of thought as " Japanism," while in
the economic world a national movement was also inaugu-
rated. So, although the spirit of the nation was sadly de-
pressed at first because of the return of the Liaotung Peninsula,
in an incredibly short time confidence was restored, as the
people were buoyed up by the expectation of a large indemnity
to be received from China, and the spirit of enterprise was
bom again. At this opportune time the Bank of Japan
instituted the policy of encouraging enterprises by loosening
its purse, so that the spirit of enterprise became widespread,
its heartening influence being in inverse ratio to the de-
pression caused by the return of the Liaotung Peninsula.
Consequently, the tendency to frugality which was favored
during the war was very generally superseded by extrava-
gance, prices rose, — though this was not the only cause, —
foreign trade showed an excess of imports over exports, and
the business world experienced a complete change. Although,
as we have stated before, the "Ten- Years' Plan" was a
serious proposition, considering the national strength at the
time, yet it was easily executed on account of the rising spirit
of the nation ; and this enterprising spirit rose as the result of
the aforementioned national movement in the economic
world. But as during the war industrial capital had been
absorbed in war expenditure, and after the war, in the various
enterprises undertaken by government and people, capital
became suddenly static. Then, besides, the greater part of
the indemnity received from China was spent for unproduc-
tive purposes, which, so far from helping capitalists, caused
the evils which naturally accompany the inflation of currency.
Moreover, the securities reserve note issue of the Bank of
Japan was increased more and more. The result was the
encouragement of a spirit of extravagance, and a rise in prices,
which placed various difficulties in the way of materializing
the enterprising spirit of the time, and even made political
trouble. The ministry was changed several times. Conse-

EFFECTS ON THE MONEY MARKET 1 59

quently the national movement for progressive enterprises
which arose after the war was checked, and the high spirits of
the nation were depressed, and finally the financial distress
experienced after the war led to a slight panic in 1899. This
was not perfectly relieved, and another panic occurred in 1901.
The national movement also, which had promised great
things at the close of the war, was kept from expanding, and in
this condition the nation had to meet the Russo-Japanese War.
The financial ups and downs during the Sino- Japanese War
and ten years thereafter have been briefly explained. We
shall now proceed to set forth financial conditions during that
time by taking up the most important points in connection
therewith.

Reform of the Currency System

Japan established the gold standard monetary system by
Law No. 16, promulgated on March 26, 1897.

The monetary system of our country prior to this time had
been based upon the bimetallic system established by the
Tokugawa Shogunate in the sixth year of Keicho, 1 601, and
maintained for 260 years or until the period of the Restoration
of Meiji. But whenever financial distress occurred the
metallic money was reminted, and except during the reform
of the Kyoho period, the weight of the coins was reduced and
the quality debased, so that the currency system in this way
destroyed itself. In feudal times some among the Daimios
coined moneys with their own imprints thereon and issued
notes to circulate only in their own territory, and there were
1,600 or more different kinds of notes in circulation. In
short, in the last days of the Tokugawa Shogunate our mone-
tary system was at the extreme height of disorder and com-
plexity.

The government attempted to readjust matters in the early
part of the Meiji era. In May, 187 1, a new currency law
was promulgated, thereby laying the basis for the gold-stand-
ard system. According to this law, the yen, containing 1.5
grams of pure gold about 900 and if grams of alloy was

l60 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

made the unit of currency. There was besides this system,
another with a trade silver yen, the same in quality and
weight as the Mexican silver dollar current in the Orient
as the unit of trade currency. Now the trade silver yen
was circulated only within open ports. But at that time,
inconvertible notes were issued in our country, so that specie
flowed out in a great stream, and it was felt that to maintain
a gold standard system among silver countries in the Orient
was a very difficult task. So in May, 1878, Laws Nos. 12
and 13 were issued, whereby the trade silver yen was ordered
for general circulation at home, in paying taxes, and for pub-
lic and private transactions. From that time, Japan became
a bimetallic country.

The government, owing to the civil war and other momen-
tous events in the early part of Meiji, found it difficult to
meet all its needs by means of Treasury revenue alone. So
it was obliged to issue the following varieties of notes in
order to secure temporary relief :

Date of Issue

Total Amount of Issue

Kinds

(i) Dajokwan Notes (Cabinet)
May 15, 1868-Dec. 31, 1869. .

(2) Mimbusho Notes (Notes is-
sued by Dept. of People) Sept.
17, 1869-Oct. 31, 1870

(3 ) Convertible Notes by Finance
Department, Oct. 12, 1871-
Feb.28, 1872

(4) Convertible Notes by Colonial
Department, Jan. 14, 1872-
Mar. 31, 1872

48,000,000 ryo

7,500,000 ryo
(At first it was in-
tended to redeem
the Dajokwan notes
of small denomina-
tions with these
notes.)

6,800,000

2,500,000

10 ryo, 5 ryo, i ryo,\
hu, I shu.

2 hu, I hu, 2 shu, I shu.

10 yen, 5 yen, i yen.

10 yen, s yen, i yen, 50
sen, 20 sen, 10 sen.

But when the daimiate system was abolished and the pre-
fectural system was established in 1871, the notes issued by
different daimiates had to be taken over by the central
government ; thus it was necessary to increase the notes of the

EFFECTS ON THE MONEY MARKET l6l

central government to aid in this adjustment, and finally
new government notes were issueid. The inconvertible notes
suddenly increased to an enormous amount. According to
the proclamation of December 27, 1871, concerning the issue
of new notes, these notes were to be circulated in exchange for
the notes of different daimiates. As a result, the former
became inconvertible notes. Then, when the Civil War of
1877 broke out in the southwest, the government was obliged
to issue notes to the amount of 27 million yen temporarily in
order to meet the war expenses. As the notes in circulation
exceeded the need of the economic world, there was a sudden
rise in the prices of commodities. Furthermore, by Decree
No. 104, issued in August, 1876, the law governing national
banks (Law No. 349, November 15, 1872) was revised. The
regulations allowing the national banks to issue bank notes
with 6 per cent bonds redeemable in gold notes as security^
were revised, so that bonds bearing 4 per cent interest were
allowed to be used as security. The maximum total issue of
bank notes was fixed at 34 million yen. After that, these
bank notes were issued in large amounts. But as they were
convertible with the currency then in circulation, namely,
government paper money, the prices of the notes fell con-
siderably, the prices of commodities rose, the specie flowed
out, the imports exceeded the exports, and farmers became
extravagant in their expenditures. The evil effects were very
serious and one who reviews the history of that period can not
but be horrified thereby.

In consequence the government made strenuous efforts to
revise the currency system, on the one hand redeeming the
notes, and, after the establishment of the Bank of Japan in
June, 1882, ordering that bank to issue convertible silver
bank notes from May, 1885 ; and on the other hand, endeavor-
ing to accumulate specie reserve, thereby gradually restoring
the credit of the government notes. The market value of
the notes increased accordingly, and at the end of 1885 the

^ These were authorized for the purpose of replacing the government notes then
in circulation.

1 62 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

difference between silver and the notes nearly vanished. So
from January i, 1886 (according to Decree No. 14, issued
June 6, 1885) government notes could be converted into
silver at par. In addition, the plan of redeeming the national
bank notes was also established by Decree No. 14, issued in
1883, and thus our country became a true silver standard
country. Previous to this, from about 1871, the production
of silver all over the world increased and the price of silver
showed signs of declining. When Germany, in 1873, es-
tablished the gold-standard system by utilizing the indemnity
received as a result of the Franco- Prussian War and began to
dispose of the silver in her possession, the price of silver fell
still more. Then when the United States of America, the
Latin- Alliance nations, and other countries adopted the
gold-standard system, and restricted or stopped the minting
of silver coins, thus initiating the policy of excluding silver
and gathering in gold, the price of silver fell considerably
lower. In 1876, the ratio between gold and silver, in price,
was on an average i to 17.88. Whereupon the silver-
producing countries and those which possessed silver began to
discuss methods of maintaining the price of this metal. The
United States of America was especially noteworthy, as in
1878 she passed the Brand Law, whereby silver was purchased
and minted, and in 1890 the Sherman Law, which extended
the scope of the former statute. But both failed to prevent
the steady fall in the price of silver. Consequently, Austria-
Hungary, in 1892, changed her monetary system, adopting
the gold standard, and in 1893 the United States of America
revoked the Sherman Law. India also abolished the free
coinage of silver. Other countries likewise ceased using silver
for coins. As a result, in 1894 the ratio between gold and
silver became on an average i to 32.56.

After this explanation, it is not necessary to show in detail
how Japan, which was virtually a silver-standard country,
was affected. On the one hand, following the fall in the price
of silver, the exports of our country increased and the prices
of commodities rose, so that agricultural, industrial and

EFFECTS ON THE MONEY MARKET

163

commercial circles were benefited and became quite prosper-
ous; but on the other hand, the foreign exchange rate was
constantly fluctuating so that those engaged in foreign trade
were in danger of monetary losses and could not transact
business with the certainty as to profits or losses previously
assured, but had to wait idly until the fluctuations in the
exchange rate became a little less serious or were obliged to
venture forth depending only upon luck. Consequently,
transactions became speculative and business dealings with
gold-standard countries assumed a state of impasse, which in
turn produced an unfavorable result upon the money market.
Below we indicate the tendencies of the exchange rates in
London, Paris and Berlin:

Rates of Exchange in

London, Paris and Berlin

Year

London

Paris

Berlin

Highest

Lowest

Highest

Lowest

Highest

Lowest

s. d.

5. d.

/.

/.

m.

m.

1886...

3.04.04

3.00.13

4.21

3.79

3.35

3.03

1887

3.03.80

3.01.32

4

19

3

93

3.34

3.13

1888

3.01.58

3.00.05

3

95

3

79

3.16

3.01

1889

3.02.52

3.00.36

4

03

3

84

3.22

3.06

1890

3.09.08

3. 01. 10

4

73

3

92

3-78

312

1 891

3.05.19

3.01.32

4

33

3

93

3.46

3.15

1892

300. 51

2.08.64

3

84

3

43

3 08

2.75

i«93

2.08.73

2.03.87

3

44

2

92

2.77

2.36

1894

2.03.50

1 . 1 1 . 50

2

87

2

45

2.31

1.98

1895...

2.02.88

I. II. 13

2.83

2.43

2.27

1 .96

For these reasons, the Japanese Government planned to
change the silver-standard system into the gold standard, and
in accordance with Imperial Ordinance No. 113, issued on
October 14, 1893, appointed a committee to investigate the
currency system and to learn the cause of the fluctuation in
the prices of gold and silver; also whether there was need of
reforming the currency system of our country, because of the
economic effects which the fluctuation in the prices of gold
and silver produced in Japan, and if there was such need,
what system should be adopted. The committee by a ma-
jority vote decided to adopt the gold-standard system.

164 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

But the reform could not be accomplished by means of a
set of laws. A large amount of gold reserve was needed.
From 1 87 1 until the gold standard was established, the total
amount of silver issued was on its face value 165,133,710 yen.
It was not an easy matter to accumulate a gold reserve suffi-
cient to convert this amount of silver into gold, and it was
necessary to wait for a favorable opportunity. However,
an agreement was finally reached whereby the war indemnity
of the Sino-Japanese War, which was to have been received
in Kuping taels, was received in British gold in London. With
this amount the gold-standard system was established.

In discussing the proposition of establishing the gold-
standard system, some suggested that it would be advan-
tageous to plan the development of trade with gold-standard
countries in view of the fall in the price of silver, or objected
that if Japan alone should adopt the gold-standard system
while various other countries in the Orient were silver-stand-
ard countries, she would encounter serious obstacles in
carrying on trade with those countries; it was also said that,
as the production of gold in our country is too small for our
needs, it would be difficult to maintain the gold-standard
system permanently, and that when the large amount of
silver exported abroad should be reimported into Japan, the
nation would meet with great losses. In spite of all these
objections, the government decided to adopt the gold-stand-
ard system.

While the foregoing were the alleged reasons for making
this change, there was still another reason, namely, the money
market conditions of that time; for it is plain now that if
silver fell, the investment of capital by gold-standard countries
in Japan, which was still a silver country, would decrease, and
the capital already invested would be recalled. This was not
clearly seen at the time, since our finances had received bad
effects from the post-bellum undertakings and showed signs of
abnormality, resulting in the contraction of the money circu-
lation and the falling of prices of shares in the stock market.
Thus the opinion came to prevail in financial circles that if the

EFFECTS ON THE MONEY MARKET

165

gold-standard system were adopted at that time the obstacles
between Japan and the gold-standard countries would be
removed and the cheap capital of countries more advanced
commercially would at once be invested here; for this reason
there were not a few who favored the gold-standard system.
Accordingly the bill for currency reform was passed by both
houses immediately, and by Law No. 16, issued March 26,
1897, the new system was put into operation. Thus from
October i of the same year, Japan became a gold-standard
country.

That the financial world thus desired to see the gold-
standard system established because of the conditions which
existed at that time may be gathered from the fact that
when the news was circulated in the stock market, securities
rose in price. A few examples are cited below:

Effect of Currency Reform Bill on Stock Exchange

N. Y. K.

Tanko
Railway

Sanyo
Railway

Kanega-

fuchi
Spinning

Tokyo

Stock

Exchange

Rumor of Bill being
introduced :

Previous day

On the day

Rise

Yen
78.10
79 50

1 .40

Yen
87.70
89.80

1 .10

Yen
53 90
55.10

1.20

Yen
60.00
61 .00

1 .00

Yen
369.50
376.00

Introduction in
House of Commons:
Feb. 26

79 50

81.30

1.80

98.80

99.80

1 .00

55.10

56.40

1.30

61.40

62.00

0.60

376.00

386.00

10.00

March i

Rise

Approved by Special
Committee of the
House:

Previous day

March 6

Rise

75 70

77.30

1.60

95.80

97.30

1.50

5500

55-20

0.20

61.60

62.10

0.50

369.50

379 00

9.50

Passed by the House:

Previous day

March 12

Fluctuation

76.90

76.60

0.30

97-50

98.10

0.60

55.00

55.60

0.60

61.10

386.00

Passed by Peers:

Previous day

March 23

Fluctuation

76.90

76.60

0.30

99.30

lOI.IO

1.80

55.30

55.70

0.40

62.10
62.10

385.00

402.00

17.00

1 66 economic effects of the sino- japanese war

Expansion of Issue Capacity of Convertible Notes

The revised law governing the issue of convertible bank
notes issued in March, 1899, raised the amount of the securi-
ties reserve issue from 85 million yen to 120 million yen. This
was due to the fact that the government believed the in-
creasing stringency of the money market indicated a shortage
of capital or currency (bank notes), and previous to that
period the bank notes were almost always issued in excess
of the settled limitation. What, then, was the condition of the
extra-limit issue of notes? Before we discuss this matter, we
must describe the securities reserve issue of notes by the Bank
of Japan, especially the history of the extra-limit issue.

The Bank of Japan was established as a central bank on
October 10, 1882, at the time when inconvertible notes (both
government and bank notes) fell in price, in order to meet the
emergency, in accordance with Decree No. 32, issued on June
27, 1882, setting forth the purpose of the bank. Beginning
from September 8, 1886, the bank's notes were issued, in
accordance with Decree No. 18 of May 26, 1885, regulating
the issue of convertible bank notes.

At first the bank was required to keep only a reasonable
amount of reserve specie to redeem the bank notes issued.^
The Minister of Finance occasionally suggested the amount of
notes to be issued, and the reserve for the exchange was at
first limited to specie. But later the government notes and
bank notes were constantly being adjusted, so that at the end
of June, 1889, the amount of government notes on hand was
49>337.248 yen, and of bank notes 28,059,486 yen. Compar-
ing these figures with the highest amounts of the various
notes in circulation, we see what an extraordinary amount of
redemption had been effected.

As there were 49,177,864 yen worth of notes on hand on the
last day of June, 1888, there was after all a decrease of 43,-
582,880 yen. Consequently, the currency decreased con-
siderably in amount. So the government firmly established

* Article 2 of the same decree.

EFFECTS ON THE MONEY MARKET
Redemption of Bank Notes

167

Notes

Date

Highest

amounts of

various notes

in circulation

Amount
June 30, 1888

Decrease,

June 30, 1888

compared

Government notes. .
National bank notes.
Total amount of vari-
ous notes

Feb. 28, 1878
Feb. 28, 1879

Jan. 31, 1880

Yen

141,274,862

28,347,876

170,157,477

Yen

49.337,248
28,059,486

77,396,733

Yen

91,937,615
288,390

92,760,744

the system of conversion and in addition decided that the
time to do away altogether with the former currency system
had now come. So the laws governing the issue for the
conversion of the convertible bank notes were revised. While
in principle issuing bank notes with gold and silver specie or
gold and silver bullion as a reserve (that is, an issue based upon
the specie reserve), the Bank of Japan was allowed at the
same time to issue bank notes to the maximum limit of 70
million yen with government or other reliable securities or
commercial documents as a guarantee.^ In case of need the
bank was permitted to increase the bank notes according to
the market conditions, and to issue notes with the foregoing
securities as a guarantee by paying to the government a tax
on the issue at a rate of over 5 per cent per annum on the
amount of the issue, after the permit of the Minister of
Finance had been obtained. ^ This was based upon a lesson
learnt from the principle of indirect restriction (Konzinsen-
tierung) or the elasticity method of note issue followed by the
Imperial Bank of Germany, and the Bank of Japan per-
formed thereafter an important service as a steadier of the
money market and the supplier of capital. Then, on March
3, 1890, for the first time there was 300,000 yen worth of the
extra-limit issue. The highest amount was 500,000 yen,
between March 10 and April i. This was due to the fact
that at that time, owing to the rise in the price of rice, the

^ Of this amount, 27 million yen was issued gradually, with the amount of the
redemption of the national bank notes since January i, 1889, as the limit.
^ This was the securities reserve issue.

1 68 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

adverse balance of foreign trade, the reactionary influence on
the rise of the enterprising spirit, and other causes, the money
market showed the prevalence of abnormal conditions. But
the government construed this fact as indicating that as a re-
sult of the spirit of enterprise which had sprung up since 1887,
various enterprises would develop rapidly, foreign trade
would also be extended and the demand for the bank notes
in circulation in the economic world of Japan would increase.
So at length by Law No. 34, issued May 16, 1890, the amount
of the securities reserve issue was increased from 70 million
yen to 85 million yen. This was the opening wedge in the
extension of the securities reserve issue, which we are to
discuss here. The government, influenced by the experience
of some nine years thereafter, ultimately increased the amount
to 120 million yen. Let us describe the actual occurrences
of these years.

A reaction following the relaxing of the money market
since 1891 was shown in the latter half of 1893. Foreign
trade showed an adverse balance. Furthermore, on the
breaking out of the Sino-Japanese War, the second extra-
limit issue took place. From December 29, 1894 (3.272,721
yen), to January 12, 1895, the highest amount was 4,197,549
yen at the end of December, 1894, ^^^ the average amount
was 2,211,054 y^'^'

In April, 1895, a peace treaty with China was formulated.
But owing to the return of the Liaotung Peninsula the people
of Japan were downcast and the economic world greatly
depressed. But as a result of the third extra-limit issue, on
May 28, for the purpose of obtaining a loan for the govern-
ment, and also because the Bank of Japan had instituted the
policy of reviving finances by lowering the interest rate on
loans, this extra-limit issue was continued from the end of
May, 1905 (1,993,433 yen), to May 19, 1906; at the end of 1905
the amount reached 55,083,147 yen, the average amount
throughout this period being 29,100,731 yen. This was an
enormous amount, indeed. As the extra-limit issue of that
time was due to the loans by the government, when the regu-

EFFECTS ON THE MONEY MARKET

169

lations as to the disposal of deposits of the indemnity were
established in May, 1896, this extra-limit issue was discon-
tinued. Then, in the latter half of 1897, the reaction from
the postbellum spirit of enterprise, the rise in the prices of
commodities, and the adverse balance of foreign trade became
both causes and effects in themselves, so that from July 24,
1893 (455,306 yen) until September 14, 1898, extra-limit issues
were sent out four times, with a maximum amount of 47,312,-
657 yen at the end of 1897, and an average of 25,044,485 yen.
The reason for the withdrawal of the extra-limit issue was
that the government had purchased the war and consolidat-
ing bonds from April, 1898, and the money market had relaxed,
and also that the government, in order to pay for the purchase
of the bonds with the money borrowed on the indemnity de-
posits, had returned the convertible notes of the extra-limit
issue which had been borrowed from the Bank of Japan. In
short, the extra-limit issue of the securities reserve was trans-
formed apparently into the specie reserve convertible notes.
But from October 26, 1898, especially from December 16,
until February 21, 1899, an extra-limit issue of notes was
again sent forth several times in succession, with a maximum
amount of 24,016,568 yen at the end of December, 1898, and
an average of 3,287,195 yen on the first occasion (from October
26 to November 7), 1,454,144 yen on the second occasion
(from November 27 to December i), and 8,254,165 yen on
the last occasion (from December 16 to February 21, 1899).
We shall briefly present below the average and the maximum
amounts of extra-limit issues since the securities reserve issue
was increased to 85 million yen:

Duration

Average

Maximum

Dec. 29, i894.-Tan. 12. i8qs

Yen
22,111,054
29,100,731
25,044,485

3,287,195
1,454,144
8,254,165

Yen

4,197,549
55,083,147
47,312,657

8,110,818

May 31, 1895-May 19, 1896

July 24, i8g7-Sept. 14.. i8q8

Oct. 26, 1898-N0V. 7, 1898

Nov. 27, 1898-Dec. I, 1898

1.667.027

Dec. 16, 1898-Feb. 21, 1899

24,016,568

Total average

14,875,296

170 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

That the actual results of the extra-limit issue were as
described above is proved by the fact that the government
and people of Japan raised the amount of the legal guar-
antee reserve issue from 85 million yen to 120 million yen.

The relation between the amount of the legal guarantee
reserve issue and the demand for capital by the financiers of
any nation is so well known to economists that there is no
use of enlarging upon it here. But if we reflect a little we
shall see that the extra-limit issue only signifies that the
amount of the bank note issue has exceeded the limit estab-
lished by law, whereas the so-called legal limit is not the limit
of the first instance, but one based upon a fluctuating specie
reserve issue. Hence it is not proper to judge the demand for
capital in the economic circles of a country by this fact
alone. We should observe also the specie, the guarantee
reserve issue, and the total amount of the issue. Then,
again, the legal extension of the amount of guarantee reserve
issue permitted has given the Bank of Japan considerable
power to supply capital, and as she would not be likely to
neglect this opportunity to benefit herself, and as the eco-
nomic world would eagerly appropriate this supply of cheap
money, the currency in circulation would greatly increase
and its effect upon general economic conditions in the country
would not be slight. Accordingly, the discussion of the pro-
priety of extending the issue would be a link in the discus-
sion of post-bellum economy.

Table II at the end of this chapter^ shows the amount of
bank note issues since 1894, when the extra-limit issue first
appeared, and Table IIP shows the increase and decrease
compared with 1893.

As shown in the foregoing tables, the bank note issues
rapidly increased during this time. But there is one thing to
be noted, namely, that during the foregoing period the con-
vertible notes of the Bank of Japan were not the only paper
currency issued. So we must consider the entire volume of
paper currency in circulation during this period.

1 Post, p. 197. 2 Fosi, p. 198.

EFFECTS ON THE MONEY MARKET
Paper Money in Circulation, 1893- 1899

171

At end of year

1893

1894

189s

1896

1897

1898

1899 (Feb.)
1899 (Dec.)

Total . . .

Government
notes

Yen

16,407,000

13.404.S47

11,129,224

9,376,172

7.451.098

5,411.726

5,293.724

4.125.783

72,599.274

National
bank notes

Yen

22,756,119

21,781,797

20,796,786

16,497.889

5,024,729

1.866,563

1,684,06s

90,407,948

Convertible

notes of Bank of

Japan

Yen
148,663,128
149,813.700
180,336,815
198,313.896
226,319,058
197.399.901
181,218,176
250,562.040

1,532,626.714

Total

Amount

Yen
187.826,247
185,000,044
212,262.825
224,187,957
238.794.885
204,678,190
188,195.965
254,687.823

1.695.633.936

Comparison

with

1893

100

0

98

S

113

0

119

4

127

I

109

0

100

2

135

6

From the foregoing tables, it will be seen that while the
increase in the notes issued by the Bank of Japan was great,
yet these notes, except when required by the natural demands
of the economic world, were issued to replace the government
notes and bank notes which were in process of gradual ad-
justment or extinction, and that in reality the total volume of
the paper currency rose and fell in turn without showing any
very great permanent increase.

Moreover, the extra-limit issue of the convertible notes of
the Bank of Japan was effected in many instances when there
was a decrease in specie.

The extra-limit issues of May, 1895, and July, 1897, both
coincided with the decrease in the specie reserve. But in
financial circles there was always need of a certain fixed
amount of convertible notes. In case the amount of the
issue of convertible notes fell below what was necessary, be-
cause of a decrease in the specie reserve, it may naturally be
inferred that by some other method — the guarantee reserve
issue, for instance — the deficiency would be met, and
that the cause of the increase on the guarantee reserve issue
lay, aside from the government loans, in the increase in in-
dustrial loans made to the people generally. That the loans
made by the Bank of Japan increased extraordinarily is
shown in Table IV at the end of this chapter.^

1 Post, p. 199.

172 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR
Extra-Limit Issues of Convertible Notes

At end of

1895

April

May

(June-Nov. omitted)
Dec

1896

Jan

Feb

March

April

May

(June-Dec. omitted)

1897
(Jan-May omitted)
June

July

(Aug.-Nov. omitted)
Dec

1898

Jan

Feb

Mar

(April-July omitted)

Aug

Sept

Oct

Nov

Dec

Specie
reserve

Yen
68,532,320
66,199,000

60,370,797

54,890,176
54,589,146
55,347,002

55,574499
106,308,649

119,437,064
109,780,678

98,261,473

91,568,364
83,626,224
74,651,152

88,498,228
91,307,480
88,468,720
90,180,017
89,570,239

Decrease

compared

with month's

end, from

standard

Standard
2,333,320

8,161,523

13,642,144

13,943,174
13,185,318
12,957,821
37,776,329*

Standard
9,656,386

21,175,591

27,868,700
35,810,840
44,785,912

30,938,836
28,129,584
30,968,344
29,257,047
29,866,825

Bank note
issue

Yen
132,839.984
132,573,715

180,336,815

171,211,604
164,408,373
157,141,819
154,748,631
165,837,762

195,302,669
198,728,088

226,229,058

212,003,989
195,297,483
195,889,761

186,361,320
174,472,809
180,122,704
177,581,079
197,399,901

Extra-limit
issue

Yen

1,993,433
55,083,148

50,937,636
44,434,259
36,409,048
33,786,956

10,325,196
47,312,657

39,529,488
30,626,515
39,658,322

14,681,165

8,110,818

3,677,028

24,016,569

» Increase.

The origin of the extra-limit issue and the increase in loans
being as just stated, we see that the government considered
the limit of the guarantee reserve issue too small; especially
since, owing to the stringency of the money market at that
time, commercial and industrial circles desired the legal
limit of the issue to be extended and the powers of the Bank of
Japan to be increased. Moved by this request, the govern-
ment extended the legal limit by Law No. 55, issued March 9,
1898, and applied 15 million yen out of the 35 million yen
increase to the relief of the domestic money market, thereby

EFFECTS ON THE MONEY MARKET 1 73

Opening the way for high-class exchange transactions, the
discounting of checks, and an increase in branch banks. At
the same time, 20 million yen were applied to relieve the
stringency of the money market and facilitate transactions
with Europe, America and the Orient. The Yokohama
Specie Bank was ordered to engage in the work of facilitating
the China trade especially.

But we believe it was a mistake, in view of existing condi-
tions at that time, to extend the legal limit of the guarantee
reserve issue merely because of the frequency of extra-limit
issues, without first investigating what the reason was for the
increase in convertible notes. We do not mean to argue at
length as to the merit of the policy here. We only wish to
make it clear how this procedure disturbed the money market
after the war and created an unfavorable effect upon the
national finances. For even if the amount of the guarantee
reserve issue had been determined by law, it would not have
bound economic circles ; and even if the issue of notes should
go beyond the legal limit, it would not menace the financial
interests, so that the extension of the legal limit by 35 million
yen as mentioned above had no practical significance at all.
But the extension of the amount of issue exempted from
taxation allowed the Bank of Japan has given that bank
great power to furnish capital — such that if this power were
employed wrongfully, bank notes would be at a premium and
this would have serious effects upon finance. Then, again,
our financiers and economists, drunk with the glory of victory
after the Sino- Japanese War, were about to make great
strides ahead when Japan was obliged to return the Liaotung
Peninsula. The people suddenly became pessimistic. So
the government adopted a liberal policy and ordered the
Bank of Japan to lower the rate of interest.^ This was done
in order to encourage the people, so that optimism might be
gradually restored and the people realize that they need no
longer remain depressed. They accordingly took courage

^ At that time the discount rate was 2 sen i rin per diem, that is 7.665 per cent,
which was changed to i sen 9 rin per diem, that is 6.935 P^r cent.

174 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

and became enthusiastic over post-bellum enterprises; the
demand for capital for army and naval expansion and for the
prosecution of said enterprises increased enormously, and
finally a great financial panic occurred, as is mentioned
later.

Thus the sudden increase in capital after the war was due
partly to the need of the government, but not a little to the
deliberate policy of the government and the Central Bank.
Consequently, the development of a sudden demand for
capital as described heretofore can not be considered the
result of a healthy development, or a natural evolution in the
economic life of the people ; for in economic development there
are true and false tendencies. That financial circles which
have shown a tendency to great activity should suddenly
shrink from advancing is a phenomenon to be observed only
in a period of speculation and vainglory. The conditions in
the financial circles of our country after the Sino- Japanese War
were indeed such. Judged from these facts, the arguments
advanced in favor of extending the amount of the guarantee
reserve issue based upon the phenomena resulting from this
false tendency may be considered as castles in the air, with
great instability of foundation. They can not escape the
criticism of inconsistency.

As has been said, the extension of the amount of the guar-
antee reserve issue can not properly be considered necessary,
judging from the point of view of a dispassionate critic. On
the contrary it poured oil on the prairie fire of the false
phenomena of financial circles in order to cause an increase in
the issue of convertible notes and may be considered as one
cause of unsteady ing the money market. If we remember
that the so-called extension of the issue by 35 million yen is
22 per cent of 158,517,000,000 yen, which was the average
amount of the issue between 1893 and 1898, it is not difficult
to see how great the effect must have been.

Before closing this section we would call attention to Table
V at the end of this chapter, which shows the amount of the
issue at the end of each year since 1899.

effects on the money market 1 75

Increase of Monetary Facilities

Necessitated by the national development after the Sino-
Japanese War, the increase and reform of monetary facilities
were planned by the government. In the first place the
business of the Bank of Japan and of the Yokohama Specie
Bank was enlarged, the Hypothec Bank and the Bank of
Agriculture and Commerce were established, and in addition
industrial banks and the Bank of Formosa were newly es-
tablished, in order to meet the needs of the time; and, secondly,
a wise disposition of the national banks was made and the
causes of economic troubles were removed. The ordinary
monetary institutions of Japan had been largely reorganized
before the Sino-Japanese War; i.e., on July i, 1893, a com-
mercial statute was put into force followed by banking
regulations ^ and savings bank regulations,^ and thus the bank-
ing business, which had been under imperfect control be-
fore, now entered upon a new era of development. Numer-
ous banks were established at this time. But the Bank of
Japan and the Yokohama Specie Bank, national banks
authorized with the power to issue notes and a few private
banks and savings banks may be especially mentioned.
Consequently, facilities for supplying capital for commercial
purposes seem to have been rather general throughout the
country. But the banks for realties and securities had not yet
been established. As for facilities for agriculture and in-
dustry, there was also a great lack here.

Consequently the government made endeavors to improve
monetary facilities, and thus meet the needs of the time. For
example, the Hypothec Bank of Japan, the Bank of Agri-
culture and Industry, and the Colonial Bank of Hokkaido
were established for real property, the Industrial Bank of
Japan for securities and the Bank of Formosa to meet the
needs in the newly acquired territory of Formosa. As to the
Bank of Japan and the Yokohama Specie Bank, the govern-
ment, in order to increase their usefulness after the war,

1 Law No. 72, August, 1890. ' Law No. 33, August, 1890.

176 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

allowed them either to increase their capital or to increase the
amount of the securities reserve issue, ^ thereby increasing the
loaning power of the banks so that they might contribute
toward the betterment of finances after the war.

The following record will enumerate the various advance
steps made at this time:

(i) The Bank of Japan increased her capital by 10 million
yen in August, 1895, thus raising her authorized capital from
20 million yen to 30 million yen.

(2) The Yokohama Specie Bank increased her capital by 6
million yen in March, 1896, thus raising her authorized capital
from 6 million yen to 12 million yen,

(3) The Hypothec Bank of Japan (the bank dealing with
real property) opened her doors in August, 1897.

(4) In each prefecture a bank of agriculture and industry
was established between February, 1898, and August, 1900,
— forty-six banks in all.

(5) The national banks (153 in number) became private
banks in February, 1899, ^^d the circulation of national
bank notes was prohibited from December 9 of the same year.

(6) The Bank of Japan was permitted to increase the
amount of her securities reserve issue in March, 1899, by 35
million yen, making the total 120 million yen^

(7) The Yokohama Specie Bank increased her capital in
September, 1899, by 120 million yen, making her authorized
capital 24 million yen.

(8) The Bank of Formosa was opened September, 1903.

(9) The Colonial Bank of Hokkaido was opened April, 1900.

(10) The Industrial Bank of Japan was opened April, 1902.
For several years after the war, a period of reform ensued

as regarded monetary institutions. The money market,
which had already been adjusted to conditions before the war,
had now to be steadied by the aid of special banks operated
in all directions, so that no more complaints might be raised
about the lack of financial facilities. In short, the ten years

» By Law No. 55, March 9, 1899, the amount was increased from 85 million yen
to 120 million yen as before described.
' Cf. section on expansion of issue capacity of convertible notes, p. i66.

EFFECTS ON THE MONEY MARKET 1 77

after the Sino- Japanese War might be designated as the
period foi' perfecting financial facilities. The steady na-
tional development after the war and the solid as well as
remarkable achievements of national finance may be said to
have been due largely to the financial policy of the govern-
ment. Of the financial policies mentioned above, we have
already dealt with one in detail, viz., the extension of the
securities reserve issue (in the section on expansion of issue
capacity of convertible notes). We shall now take up the
remaining subjects.

The Yokohama Specie Bank

The Yokohama Specie Bank, at the end of 1893, that is, the
year previous to the Sino- Japanese War, had an authorized
capital amounting to 6 million yen (with a paid-up capital
of 4,500,000 yen). But after the war her business gradually
increased. Since February, 1896, the London branch of the
bank acted as agent for the Bank of Japan, by taking charge
of the indemnity received from China and disposing of it.
On July I, 1895, the Shanghai agency of the bank, which had
been closed owing to the Sino- Japanese War, was reopened.
On September 15, 1896, an agency was opened at British
Hongkong. Furthermore, in July, 1894, increased capital
was required by the bank with a view to opening an agency at
Bombay, India. So, on March 25, 1896, the authorized
capital was increased to 12 million yen. In September, 1899,
this amount was doubled, thus becoming 24 million yen. A
branch was established at Tientsin (August, 1899), ^-t Neu-
chang (August, 1900), and at Peking (January, 1902), thus
extending the sphere of activity in China. A further advance
was made in September, 1901, when the by-laws of the bank
were revised so that, in case business transactions abroad
required it, the various branches and agents would have
power to issue notes payable on sight. In November, 1902,
for the first time, such drafts were issued by the Tientsin
branch of the bank ; in December, by the Shanghai branch ; in
January, 1903, by the Neuchang branch; and in March by the
13

178 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Peking branch. The conditions of loans from 1893 showed a
sudden development about 1899, as will be seen from Table
VI at the end of this chapter.

Realty banks

Three kinds of banks were established to deal in real prop-
erty, as given below:

Name

Law
governing

No.

Authorized
capital

Paid-up capital
at time of es-
tablishment

Opening

Hypothec Bank
of Japan ....

Bank of Agri-
culture and
Industry . . .

Colonial Bank
of Hokkaido .

No. 82, April
20. 1896. . .
Nos. 83 and
84, April 20,
1896

No. 76,
March, 1899

I

46

I

Yen
10,000,000

28,370,000*

3,000,000

Yen
2,500,000

22,923,485b

1,050,000

Aug. 2, 1897
First on Feb.
I, 1898, and
last on Aug.
17, 1900

April I, 1900

• Average per bank, 6i6,739 yen.

•> Average per bank 498,337 yen.

The province of these three kinds of banks was lending
money for long terms on real property and at a low rate of
interest (in case of the Colonial Bank of Hokkaido, agricul-
tural products or shares or bonds might be used as security
in place of real property). The object was to improve and
develop agriculture and industry. The Hypothec Bank of
Japan was established in Tokyo as the central bank for real
property, and also one in each of the several prefectures. ^
These banks were to cooperate with the Hypothec Bank in
order to supply capital for agriculture and industry. As to
the province of the Colonial Bank of Hokkaido, it was not
fundamentally different from that of the Banks of Agriculture
and Industry, but whereas (i) the shareholders of the Banks
of Agriculture and Industry were confined to those who had
their residence registered and were actually residing in the
prefectures in which the banks were situated, and (2) the
amount of subsidy from the government was limited to 5 per
cent of the paid-up capital per annum, in the Hokkaido Bank

1 Fu and ken "prefectures" are terms designating administrative districts and
first-class local organizations, and their number is 46, that is, 3 fu and 43 ken.
The differences between fu and ken are historical rather than substantial.

EFFECTS ON THE MONEY MARKET

179

these regulations were not and could not be enforced. So, in
order to permit special regulations for this bank a separate
law was enacted. The amounts expended by the govern-
ment as subsidies in the establishment of the banks for real
property, as mentioned above, are as follows:

Government Subsidies to Banks

Subsidy to

Subsidy to Banks

Subsidy to

Year

Hypothec Bank

of Agriculture and

Colonial Bank

Total

of Japan

Industry

of Hokkaido

Yen

Yen

Yen

Yen

1897

55,052

1, 138,320*

....

1,193.372

1898

30,010

6,2i6,68o»

....

6,246,690

1899

30,873

688,620»

250,000

969,493

1900

....

155,000*

250,000

405,000

1901

....

5,000

200,000

205,000

1902

....

5,000

200,000

205,000

1903

....

5,000

....

5,000

Total. . . .

115.935

8,213,620

900,000

9.229,555

» 5,000 yen each year (total 20,000 yen) were subsidies to the Bank of Agriculture and Industry in
Okinawa Prefecture (Loochoo).

Not only were the foregoing amounts actually expended as
subsidies, but in the case of the Banks of Agriculture and
Industry and the Colonial Bank of Hokkaido, immunity was
given from paying dividends to the government for the shares
in its possession for a certain number of years. These arrange-
ments helped greatly to realize the object of the subsidies.

The establishment of banks dealing with real property
has been advocated from about 1882. But in order to
perfect this plan capital for long terms and at low rates of
interest was needed. At that time, however, the general
interest rate was very high. Some of the national bonds bore
more than 7 per cent interest, so that it was not possible to
secure low-priced capital. Consequently, it was a matter of
the utmost difficulty to secure by means of bond issues
amounts several times larger than the capital of the banks.
Moreover, the value of land as security was very low, and
the circulation of money was not yet free ; further, in order to
realize profits from agriculture, a longer term is needed for

l80 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

loans than is usually allowed by commercial banks. This
was the reason why, although financial institutions for facil-
itating commercial transactions had been developed, banks for
real property had not yet been established; thus the capital
needed for agriculture and industry was lacking, and conse-
quently their full development could not readily be effected.
But the tendency in the money market was toward a
gradual fall in the interest rate. In addition, the price of
bonds rose. With the promulgation of the law concerning
consolidated bonds in 1886, bonds bearing high interest
disappeared and the price of bonds showed signs of a steady
rise. Thus a favorable opportunity for establishing banks for
real property had come. When the Bank of Japan lowered
the rate of interest after the Sino-Japanese War, the prices of
securities rose. On account of anxiety as to the inflow of the
indemnity the interest rate was lowered, bonds and shares
rose in price, and the proposal to issue bonds to secure capital
to be loaned by the banks for real property was received with
great favor. At last the laws governing the Hypothec Bank
of Japan and the Banks of Agriculture and Industry were
promulgated. We shall now briefly explain the method of
organization.

(A) The Hypothec Bank of Japan and the Banks of Agri-
culture and Industry were closely related to each other. Both
aimed at loaning capital for the improvement and develop-
ment of agriculture and industry, with real property as
security. The difference between the two was only that of
size and position ; that is, the Hypothec Bank was the central
bank, while local Banks of Agriculture and Industry were
established in the different prefectures. The Hypothec Bank
lent capital to the Banks of Agriculture and Industry by
taking the bonds issued by the latter banks. The Banks of
Agriculture and Industry acted as agents for the Hypothec
Bank. The two helped each other in supplying capital to
agriculture and industry.

(B) The capital of the Hypothec Bank was 10,000,000 yen
and its shares were valued at 200 yen each, whereas the

EFFECTS ON THE MONEY MARKET l8l

capital of the various Banks of Agriculture and Industry
was not more than 200,000 yen each, and their shares were
valued at 20 yen each. There was only one Hypothec Bank
established in Japan, whereas the other banks were numerous
— one in each prefecture — and their shareholders were re-
quired to have their residences registered, and actually to live
in said prefecture.^

In accordance with the purpose for which they were es-
tablished, the loans were made with real property as security,*
and on the annual instalment system. In the case of the
Hypothec Bank these were fifty-year, and in the case of other
banks, thirty-year instalments. In addition, loans might be
made on a system of regular instalments for five years, the
limit being one-tenth of the amount mentioned above (Hy-
pothec Bank) or one-fifth (Banks of Agriculture and Industry).

(C) The capital was represented principally by the capital
of each bank, but the most important matter to be considered
was the issue of bonds.

When one-fourth or more of the capital was paid up, the
Hypothec Bank might issue bonds to within ten times the
paid-up capital and not exceeding the amount of the loans
payable by annual instalments and the amount of the accepted
bonds of the Banks of Agriculture and Industry, while the
Banks of Agriculture and Industry might issue bonds to within
five times the paid-up capital and not exceeding the loans by
annual instalments minus the amount borrowed from the
Hypothec Bank. The bonds were valued at 10 yen and up-
ward with premium in the case of the Hypothec Bank, and at
5 yen and upward in the case of the Banks of Agriculture
and Industry. The reason why the values were fixed so low
was because thus the banks might be able to gather in small
amounts as capital.

(D) These two kinds of banks were under the control of
the Minister of Finance. In case the dividends of the Hy-

^ The registry of residence means registry in the locality where is kept the book
of registry of the family of which one is a member.

^ Public corporations were exempted from furnishing this security.

1 82 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

pothec Bank should fall below 5 per cent, the Bank was to
receive a subsidy for ten years from the time of its establish-
ment. In the case of the Banks of Agriculture and Industry
the various prefectures, in accordance with the law of subsidy
to the Banks of Agriculture and Industry^ were to be allowed
to have capital to invest in the shares of the Banks to the
limit of 70 yen per hundred cho of taxable land, not in-
cluding house lots, mineral-water sites, or swamp grounds of
the various prefectures; also to the limit of a total of 300,000
yen per prefecture and not exceeding one-third of the paid-up
capital. Further, from the time of the establishment of the
banks it was arranged that no dividends should be required
for ten years for the shares subscribed by the prefectural gov-
ernments, and for 5 years more the dividends should be in-
cluded in the reserve fund. We shall explain later about the
amount supplied.

In this way, middle-class farmers and industrialists who
had been inconvenienced by the high rates of interest uni-
versally prevalent gained relief.

In accordance with the foregoing system, the Hypothec
Bank was established in June, 1897, with a capital of 10
million yen and a paid-up capital of 2| million yen. The
doors of the Hypothec Bank were opened August 2, 1897.

A Bank of Agriculture and Industry was established in
each prefecture, the first being the one in Tokyo prefecture
established on December 28, 1897, and the last being the one
established in Tokushima prefecture on August 9, 1900 —
forty-six in all. At the end of December, 1900, the year in
which the establishment of the Banks of Agriculture and
Industry was completed, the total amount of authorized
capital was 28,370,000 yen, and the total paid-up capital 22,-
923,485 yen, of which 8,178,620 yen was the amount of the
government subsidy, in accordance with the law of subsidy,
to the Banks of Agriculture and Industry. At the time of
their establishment, it happened that the money market was
tight and there was a great demand for capital. So loans

1 Law No. 84, April 20, 1896.

EFFECTS ON THE MONEY MARKET

183

were steadily made and a great service was thus rendered
agriculture and industry by these banks. In the case of the
Hypothec Bank, between 1898 and 1903 the total amount of
bonds issued was 72,557,820 yen. At the end of each year
the amounts loaned dwindled, according to the nature of the
loan, some being repaid in annual instalments, some at regular
periods. The figures are as follows :

Outstanding Loans for Various Purposes at End of Each Year, i 897-1903

Year

Agriculture

Industry

Public
corporations"

Public
associations**

Total

Yen

Yen

Yen

Yen

Yen

1897

342,709

816,600

10,000

206,703

1,376,012

1898

1,426,257

4,477,939

313,593

488,945

6,706,734

1899

2,328,762

4,886,682

539,425

1,019,973

8,774,842

1900

3,477.737

5,873,213

1,075,883

1,223,798

11,650,631

1901

4.565,202

6,451.573

1,601,883

1,429,920

14,048,578

1902

6,348,882

7,559,603

1,780,858

1,609,659

17,320,102°

1903

8,544,907

7,982,041

3,044,512

1,940,674

21.795,394**

» Includes loans to prefectures, counties, cities, towns and villages.

^ Includes loans to water improvement guilds, earth-work guilds and arable land adjustment
guilds.
« Includes 21,100 yen, loans of the Banks of Agriculture and Industry.
«J Includes 283,260 yen, loans of the Banks of Agriculture and Industry.

The amounts of the bonds of the Banks of Agriculture and
Industry taken over were not included in the foregoing table.
They were as follows :

Year

1899
1900
1901
1902
1903

Face value

Yen
142,280
175,580
239,390
442,610
586,650

Price

Yen

137,344
170,644

234.454
437.799
565.401

Now, by examining the Banks of Agriculture and Industry,
we find the amounts of the bonds of those banks reached
7>033430 3'^^ between 1899 and 1903, and the amounts of the
loans, those redeemable by annual^ instalments and those
redeemable at regular periods, are shown in Table VII at the
end of this chapter. ^

^ Post, p. 202.

1 84 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Again, in order to show the power of the banks to do busi-
ness in spite of the figures, two additional tables VIII and
IX have been inserted at the end of this chapter. ^

Let us consider next the Colonial Bank of Hokkaido. Its
purpose was the same as that of the Banks of Agriculture and
Industry of the various prefectures, but Hokkaido was dif-
ferent from other parts of the country in that the circulation
of money was not yet sufficient, and in consequence the
interest rate was very high. It was not easy, therefore, to
establish a bank with qualifications as to shareholders, profits
and subsidy the same as for the Banks of Agriculture and
Industry. So the sphere of activity of this bank was made a
little broader, and as we have briefly explained before, a
special law was framed to permit a special kind of subsidy for
it. The authorized capital was 3 million yen of which i
million yen was furnished by the government, and on the
government shares no dividends were required for ten years
after the last day of the first period of the establishment.
The business of the bank was begun on April i, 1900, with a
paid-up capital of 750,000 yen.

Although the sphere of activity of this bank was in the
main the same as that of the other Banks of Agriculture and
Industry, yet there were some differences. For example,
as this bank was not only to loan money on the security of real
property, but also to furnish capital for the development of
the land of Hokkaido, loans were made with agricultural
products, shares and bonds as security, bonds were subsidized,
and the business of handling deposits and drafts was under-
taken; in short the sphere of activity was somewhat broader
than that of the Banks of Agriculture and Industry. Funds
for the business were obtained, in addition to the bank's
capital, by issuing bonds (colonial bank bonds) to the limit of
five times the paid-up capital.

The actual business condition of the bank is shown by the
following table of loans made :

1 Post, pp. 203-205.

EFFECTS ON THE MONEY MARKET
Loans of Colonial Bank of Hokkaido

185

Year

To Agriculture and industry

To
Industry

To Com-
merce

To public
institutions

Total

1900

Instalment
Regular period

Total

Yen
492,786
36,840

Yen
82,821

Yen
30,000

Yen

12,620

3,500

Yen

618,227
40,340

529,626

82,821

30,000

16,120

658,567

1 901

Instalment
Regular period

Total

Yen

913.540
221,200

Yen
126,921
103,400

Yen

25,183
5.000

Yen
12,353

Yen

1,077.997
329,600

1,134,740

230,321

30.183

12,353

1,407.597

1902

Instalment
Regular period

Total

Yen
1,031,781
247,460

Yen
152,014
128,000

Yen
166,728

Yen
51,864
40,000

Yen
1,402,387
415,460

1,279,241

280,014

166,728

91,864

1,817,847

1903

Instalment
Regular period

Total

Yen
1,183,176
427,741

Yen
109,706
113,600

Yen

242,858

80,700

Yen
40,223
40,000

Yen

1.575.963
662,041

1,610,917

224,306

323,558

80,223

2,238,004

As for the capital used in the business of the bank, the
colonial bank bonds were issued until 1904. The rest was as
follows :

Paid-up
capita

Reserve

Percentage
of dividends

Loans

Year

Total in
year

Balance at
end of year

1900

1901

1902

1903

Yen
1 ,050,000
2,098,400
2,100,000
2,700,000

Yen

2,343

15,248

76,400

106,600

7.0
7.0
8.0
8.0

Yen

723,435
1,911,118
3,532,080
5,287,744

Yen

703.544
1,501,606
2,102,857
2,646,278

Total . . .

7,948,400

200,591

11,454,377

6,954,285

Bank of Formosa
The Bank of Formosa was established in accordance with
Law No. 38 of March, 1897,^ as the central financial institu-

1 Concerning the Bank of Formosa.

1 86 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

tion of Formosa, with the object of furnishing capital for
commerce, industry and public works, of developing the
economic resources of Formosa, and of extending the scope of
business of the Bank to South China and the South Sea
Islands by providing a financial organ for the commerce of
these countries; the Bank was also intended to secure the
economic independence of Formosa and reform the monetary
system. The government believed that the sound develop-
ment of Formosa could not be hoped for unless protection was
given to the Bank, in view of the conditions prevailing in the
island, where everything was still undeveloped, peace and
order were not yet secured, and the credit system was not yet
established. So, by Law No. 35 of March i, 1899,1 (i) 2
million yen of silver were lent to the Bank without interest, to
be used exclusively as a reserve fund for the conversion of
notes, (2) I million yen of the 5 million yen capital of the
Bank were subscribed by the government. In addition, it
was arranged that the dividends on shares payable to the
government should be transferred for five years to the reserve
fund for meeting the losses of the Bank, thereby making the
establishment of the Bank easier, and then on July 27 of the
same year, the silver 2 million yen were exchanged for 2,127,-
659 pieces of silver yen in coins (94 sen per i piece) and these
were paid to the Bank together with 54 sen of auxiliary silver
coins, thereby fulfilling the duty of subsidizing the Bank.
The Bank on July 22, 1899, secured 1,250,000 yen or one-
fourth of the authorized capital of 5 million yen, and the
doors were opened on September 26.

This Bank, as the central bank, has the power to issue notes.
At first by Article VIII of the law concerning the Bank of
Formosa, this Bank was authorized to issue notes valued at
5 yen and upward redeemable in gold. But the conditions
in the island were not yet such as to need this conversion into
gold. So by Law No. 34 of March, 1899, this regulation was
changed and the Bank was empowered to issue notes redeem-
able in silver coin valued at i yen and upward. As to regula-

* Concerning a subsidy to the Bank of Formosa.

EFFECTS ON THE MONEY MARKET

187

tions for the reserve, to guarantee the issue of silver certificates,
specie (gold or silver) to the amount of one-half and upward
of the issue was to be kept as a reserve. For the rest, up to
the limit of 5 million yen, government notes, convertible
bank notes and other reliable certificates or commercial
checks could be made a guarantee. Again, in case of need of
a further issue of notes, the same amount of guarantee reserve
was to be kept in readiness and the tax on the issue at the
rate of 5 per cent per annum or upward was to be paid.
Bank notes were issued for the first time on September 29
to the amount of 490,000 yen.

The following table will show the actual condition of the
business from September, 1899, to December, 1903.

Specie Reserve

Date

Guarantee

Total

reserve

Gold

Silver

Total

Yen

Yen

Yen

Yen

Yen

Sept., 1899

....

449,098

449,098

....

449,098

Oct., 1899

....

1 ,050,000

1,050,000

....

1,050,000

Nov., 1899

....

1,523,337

1,523,337

....

1,523,337

Dec, 1899

....

1,834,917

1,834,917

....

1,834,917

Dec, 1900

494,276

1,577,585

2,071,861

1,511,529

3,583,390

Dec, 1901

1,829,358

1,829,358

1,370,371

3,199,729

Dec, 1902

....

3,352,719

3,352,719

1,746,447

5,099,166

Dec, 1903

222,222

2,219,303

2,441.525

2,181,989

4,623,514

Total

716,498

13,836.317

14.552,815

6,810,336

21,363,151

Again, the average annual amounts of issue at the month's
end were as follows:

Year

Specie reserve

Gold

Silver

Total

Guarantee
reserve

Total

1899

1900

1901

1902

1903

Total

Yen

352,134
50,548

614,368

Yen
1,214,338
2,017,568
1,925,684
2,799,880
2,027,593

Yen
1,214,338
2,369,702
1,976,232
2,799,880
2,641,961

Yen

1,467,707
1,486,970
1,650,940
2,222,150

Yen
1,214,338
3,837,409
3,463,202
4,450,820
4,864,111

1,017,050

9,985,063

11,002,113

6,^2^,^6^

17,829,880

1 88 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

As sho^vn in the foregoing table, the Bank of Formosa
gradually extended the scope of its business. It established
branches on the mainland of Japan, and branches and agencies
in Amoy, Hongkong and other places ; thereby more and more
perfectly rendering the service for which it was established.
Table X at the end of this chapter^ sets forth the principal
facts as to the Bank's activities in recent years.

Industrial Bank of Japan

The Industrial Bank of Japan was established as a realty
bank. It was based upon Law No. 70 of March, 1900. About
1890 our national finance was freed from the evils of incon-
vertible notes. When certain new enterprises were under-
taken and the money circulation became tight, the government
ordered the Bank of Japan to initiate the so-called security
system, that is, to give discount or allow an overdraft for a
certain amount of shares as guarantee in order to relieve the
urgent needs of the industrial world, and at the same time to
take over the loans made in accordance with the security
system mentioned above, by establishing a bank for personal-
ties. That was how the Industrial Bank of Japan came to be
established. About ten years later, when at the close of the
Sino- Japanese War new enterprises were projected, and as
capital was insufficient it became necessary to plan the
importation of foreign capital, this Bank was established to
meet the need.

The Bank's authorized capital amounted to 10 million yen,
and with the passage of the industrial bank law its establish-
ment was planned. But at that time the money circulation
was tight and did not permit the opening of the Bank. So
the issue of shares was postponed for a time. The restoration
of a favorable money market was awaited. At last, in
March, 1902, 2,500,000 yen were paid in, as the first instalment
on the shares of the Bank, and the doors were opened on April
10 of the same year. The Bank was to make loans on the
security of national bonds, bonds of local governments and

1 Post p. 206.

EFFECTS ON THE MONEY MARKET 1 89

the bonds and shares of various companies, and to underwrite
these. It was empowered to secure a part of the capital for
its business by issuing industrial bank bonds. The limit of
the bond issue was fixed at five times the paid-up capital or
not to exceed the actual amount of the loans or the local
government bonds or company bonds then in the hands of
the Bank.

Table XI at the end of this chapter^ shows the actual re-
sults of the business of this Bank.

Conditions in the Banking Industry
In the foregoing section we have explained in detail how
the government, to encourage the national development
after the Sino-Japanese War, helped to establish various
special banks, and, by enlarging the spheres of the ordinary
banks which had been established before the war, planned to
reform the monetary system. With the change in economic
conditions after the war, the government was able to solve the
problem of what disposition to make of the national banks,
which had been pending since before the war, and thereby
added to the stability of the monetary system. This should
be especially noted as a result brought about by the war.

The system of national banks was established in accordance
with Law No. 349, with the object of redeeming the govern-
ment notes which had been recklessly issued since the begin-
ning of the Meiji Era (1868) and of facilitating the circulation
of commercial capital. We shall here briefly explain the
method of issue of these bank notes. The national banks
offered the government notes in exchange for public loan
bonds — redeemable in gold certificates, and then by offering
the latter received bank notes. The national bank notes were
convertible in specie. But at that time our country exported
gold and silver, especially gold, to an enormous amount. The
price of gold coin rose, so that there came to be a difference
between gold certificates and gold coin,^ and the national banks

1 Post, p. 206.

2 Between July 1873 and 1876 the highest difference was 4.9 per cent, in March,
1876.

190 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

could no longer issue bank notes. Consequently, the manage-
ment of these banks became very difficult, and only four or
five of them were established. The government in order to
encourage the establishment of national banks and enable
them to accomplish the original purpose and at the same time
to maintain the price of the enormous amount of bonds newly
issued at the time the change in the system was made,
changed the system of specie conversion into the system of
conversion into currency, that is, government notes, by
Law No. io6 of August, 1876. Thus appeared the incon-
vertible bank notes. After this banks were established one
after another, 153 banks being established from September,
1876, to November, 1879, with a paid-up capital amounting
in all to 40,616,063 yen, while the notes issued amounted to
34,046,014 yen.

But, later, the government notes were not redeemed at all,
and at the end of January, 1878, the highest point was reached,
the notes issued amounting to 139,301,593 yen. Moreover,
the inconvertible bank notes increased gradually and the
price of notes decreased until, in 1881, the lowest point was
touched when the difference between notes and specie reached
93 per cent against gold and 79.5 per cent against Mexican
silver. Thereupon the government decided to redeem the
various notes and at the same time to change the system.
Separate banks were replaced by one central bank and in 1882
the Bank of Japan was established;^ from 1884 convertible
bank notes were issued. ^ Again the government, by Law
No. 14, of June, 1885, decided to begin the conversion of
government notes into silver coins in January, 1886.^ In
regard to these banks, it must be added that the government
revised the national-bank regulations on May 5, 1883* thereby
fixing the period of existence at twenty years in full from the
day the permit was issued; the term limit of the banks ex-
pired between September, 1886, and December, 1899. Fur-

iLaw No. 32 of 1882.

* Law No. 18 of May, 1884.

' At the end of 1885 the government notes amounted to 88,345,096 yen.

* Law No. 14.

EFFECTS ON THE MONEY MARKET I9I

thermore, it was decided to redeem the bank notes, amount-
ing to 31,812,880 yeriy which existed at the time by the
following method. This was called the united method of re-
demption of national bank notes. As for a while it caused
a great sensation in political circles after the Sino-Japanese
War, we shall briefly explain below this method of redemption.
(i) The national banks shall deposit with the Bank of
Japan, for conversion of the notes a reserve (currency)
amounting to one-fourth of the notes allowed them, which
reserve shall be kept as a time deposit during the years in
which the banks are operated, to be applied to the redemption
of the notes (first class redemption fund) .

(2) The national banks shall set aside out of their profits at
the end of each half year an amount equal to 2.5 per cent per
annum of the amount of the notes allowed them and shall
deposit this with the Bank of Japan as a fund for the redemp-
tion of the notes (second class redemption fund).

(3) The Bank of Japan shall purchase interest-bearing
bonds with the foregoing sums and shall redeem notes with the
interest and transfer the notes to the Department of Finance.
The Department of Finance shall then hand over public loan
bonds to said bank equal in amount to those redeemed.

According to the estimate at the time, the market price of
the public loan bonds bearing 7 per cent interest was expected
to be as mentioned below, as the result of which transaction
the amount of interest on bonds purchased up to 1897 with
the first-class redemption fund would amount to 10,738,982
yen, and the amount of the face value of the bonds purchased
with the second-class redemption fund to 13,791,515 yen and
the interest to 7,992,224 yen, totaling 32,522,721 yen. This
plan was to leave a certain amount of surplus compared with
the existing amount of the notes, the banks being able to
redeem a greater part of the notes with a portion of the in-
terest of the reserve fund and the profits at the time of the
expiration of the business term. Moreover, it was expected
that the public loan bonds and the reserve fund would remain
in the possession of the bank, and that the notes issued would

192 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

return to the bank indirectly in the form of currency, so that
the problem would be satisfactorily solved. But this plan
was impracticable for two reasons. One was that the price
of bonds rose, and the other that the bonds bearing 7 per cent
interest disappeared. For the former reason the amount
needed to purchase the bonds was reduced. For the latter the
amount of interest was reduced. The following table will
show a comparison between the price of bonds as estimated
at the time of the initiation of the united plan of redemption
and that actually received :

Comparison of Estimated and Actual Price of Bonds, i 883-1 895

Year

1883
1884
1885
1886
1887
1888
1889
1890
1891
1892

1893
1894

1895

Estimated price

Rate of

of bonds

interest

Yen

Per cent

80,000

80,000

80,000

85,000

85,000

85,000

85,000

90,000

90,000

90,000

90,000

95,000

90,000

Actual price of
bonds

Yen

83,947

93,393

96,331

107,309

101,578

101,445

101,015

99,866

100,451

101,726

106,962

105,270

99703

Rate of
interest

Per cent
7
7
7
7
5
5
5
5
5
5
5
5
5

The difference between the estimated price and the actual
market price was as just stated. Moreover, in 1886, the
law of consolidated bonds was established, and from March,
1887, the bonds of 5 per cent or above were redeemed so that
it became impossible to purchase 7 per cent bonds.

These facts produced a great miscalculation in the estimate
of the redemption fund.

Thereupon, the national banks asked for a postponement of
the right to issue notes, in order to make up for the losses
arising from the miscalculation mentioned above. The gov-
ernment on the other hand tried to deprive them of their
special privilege upon the expiration of the business term and

EFFECTS ON THE MONEY MARKET 1 93

to change them into private banks, only thus allowing them to
continue their business (advocacy for continuation). Thus
the two diverse opinions, as to extension or continuation,
constituted a great problem for the nation, especially for the
Diet, from ante-war times. But after the war, the confusion
in the money market increased, so that the advocates of
extension gained the upper hand, enthusiastically upholding
this doctrine on the ground that the future money market
would become tighter and the price of bonds would fall, and
that the reason why the price of bonds, which had risen
ordinarily at the time of the Sino-Japanese War, was main-
tained, lay in the fact that the national banks needed them.
For a while many people considered this view as being a
reasonable one. So the government by law ordered the Bank
of Japan to lend capital for the redemption of notes amounting
to 22 million yen, without interest, in order to relieve the
national banks from the difficulties which had arisen from the
aforementioned miscalculation. But, fortunately, from the
latter half of 1895 the market value of securities generally
rose and with renewed activity in industrial and commercial
circles the banking business became most profitable. So the
once powerful advocates of the doctrine of extension lost their
influence, and a bill embodying the first principle, that of
continuation, was passed by the Imperial Diet, and at last the
153 national banks disappeared altogether from the eco-
nomic world in February, 1899. Of these 153 banks, 8
dissolved of themselves on the expiration of their terms, 16
amalgamated and 7 closed their doors. Only 122 continued
as private institutions. Of these, 30 were changed after, and
92 before, the expiration of their term.

We have so far explained the problem of adjustment
connected wifii the national banks. We shall now glance at
the banking business in general. In the first place, as a re-
sult of this reconstruction of the national banks, a number of
specially privileged banks, including the Bank of Japan, the
Yokohama Specie Bank, the National Bank, the Hypothec
Bank of Japan, the Banks of Agriculture and Industry, the
14

194 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

Colonial Bank of Hokkaido, the Industrial Bank of Japan, the
Bank of Formosa, and a number of ordinary banks, were
considerably changed, as shown below:

Increase I^

r Number of

Banks,

1893-1903

Main Banks

Total

Branch Banks

Year

Special
banks

Ordinary S
banks I

avings
janks

Special
banks

Ordinary S
banks 1

avings
Danks

Total

1893.- •

135

545

r 23

1 I*

703

162

165

12

339

1894..-

135

700

30

1 I"

865

188

196

30

414

1895.- •

135

.792

[ 86
1 6*

1,013

193

277

107

577

1896...

123

1,005

1 149

I 44*

1,277

180

428

224

832

1897...

61

1,223

1 221

I 91*

1,505

83

651

270

1,004

1898...

48

1,444

[260
158"^

1.752

18

912

453

1,383

1899..-

49

1,561

1 333
1 198*

1,943

30

1,069

631

1.730

1900.. .

51

1,802

1419
1 262*

2,272

32

1.374

814

2,220

1901.. .

51

1.867 '

1441
273*

2,359

33

1457 i

r542

1337*

2,032

1902. . .

52

1,841

1431

1 270»

2,324

34

1,470

536
331*

2,040

1903...

52

1,754

1469

L2i9»

2.275

35

1,441

5«6
L291*

2,062

•Ordinary banks conducting savings business so their number was not included in the total
figures.

Table XII at the end of this chapter ^ will show the amount
of capital, deposits, net profits, and dividends of these
banks.

The following table will show the amounts of deposits and
loans for the various banks i^

» Post, p. 207.

' The special banks include the Bank of Japan, the National Banks (up to the
end of 1898), the Yokohama Specie Bank, the Hypothec Bank of Japan (after
1897), the Banks of Agriculture and Industry (after 1898), the Bank of Formosa
(after 1899), the Colonial Bank of Hokkaido (after 1900), and the Industrial Bank
^f Japan (after 1902).

EFFECTS ON THE MONEY MARKET
Bank Deposits and Loans

195

Deposits

Loans

Year

Amount

Percentage
(1893 = 100)

Amount

Percentage
(1893=100)

iSq"*

Yen
115,139,920

138,452.655
190,840,473

430,234,984
383,910,820
400,892,757

606,053,315
610,010,408
604,618,138
712,677.790
778,514,683

100. 0
120.2
165.7
373.7
333.4
438.2

526.4
529.8
525.1
619.0
676.1

Yen

195.017,509
227,909,656

322,645.257
543,823,073
500,821,394
648,390,268
882,574,248
992,247,666
921,074,784
991,138,278
1,046,774,556

100. 0

1804.

116. Q

i8qs

165.2
278.9

1896

1897

256.8

332.5
452.6
508.8

472.3
508.2
536.8

i8q8

1800

TQOO

TQOI

IQ02

lOCl

4.971,345.943

7,272,416,689

The foregoing figures show the conditions of the banks in
Japan after the Sino-Japanese War. In point of capital,
deposits and loans, all made rapid progress. Especially in
1899 was their development very remarkable, after the period
of adjustment of the national banks. All this followed as a
result of the iactivity of economic circles after the war, but
the reconstruction of the natibnal banks had a great deal to
do with producing this prosperous condition. Therefore, we
can not but recognize the fact that the war after all had no
small effect upon the banking industry.

196 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

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EFFECTS ON THE MONEY MARKET

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198 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

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EFFECTS ON THE MONEY MARKET

199

00

I

&

Q

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SI'S

ror^ .I O vO 00 xtf
^ rf >£c6 rf »0 rf rf

j^ VO •-<_ t^ q_ •« « c^^

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20O ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

3
J

"(3

3
C3
C

a
<

II

g O 00 ID tooo

■I-)

c

3

1

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Yen
250,562,040
228,570,032
214,096,766
232,094,377
232,920,563

CO

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EFFECTS ON THE MONEY MARKET

201

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202 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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204 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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206 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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s2

CHAPTER IV
EFFECTS ON INDUSTRIES

Following the crisis of 1890, came business depression,
which lasted for three years, from 1 891-1893. During these
three years, the principle of conservation was most carefully
followed in every branch of industry in Japan, and no positive
plans were adopted for any. Meanwhile, however, Japanese
business recovered from the blows of the past, the failures of
the previous years were forgotten, conditions favorable to
productive power were secured, and the once disturbed state of
the business world was remedied. As a result, capital ac-
cumulated, the condition of the money market became
sluggish and the business people of the country were thus
prepared to enter upon fresh activities. But just at this
time the Sino-Japanese War broke out, and the nation, putting
everything else aside, was compelled to devote its whole
energy to the prosecution of the war, which was a life-and-
death struggle to Japan.

Fortunately for her, Japan won a glorious victory and in-
creased her prestige greatly in the eyes of the whole world.
People in general were encouraged by this victory to such an
extent that the money market, after having met the very
large expenditure necessitated during the war, showed reserve
power after the war was over. Encouraged by this favorable
state of the money market, the enterprise of the people, which
had been restrained during the war, suddenly burst forth
everywhere in new business undertakings. Of the various
branches of business which the minds of the people were thus
stimulated to engage in during these years, railways came
first, and next banking, while the least enthusiasm was shown
for general commerce and industry.

A glance at the conditions of industry in Japan during the
war shows that while the interference with communication
and the money market affected to some extent the general

208

EFFECTS ON INDUSTRIES

209

industries of the country, yet on the other hand the unusual
activity apparent in munition factories, occasioned by the
need of munitions on the battlefield, balanced this depression.
Besides, in those days, most of the industries in Japan were
still at the outset of their development, and therefore supply-
ing local demands only, so that they did not sustain any very
serious blows during the war. Indeed, it may be stated that
even during the war industries in Japan, generally speaking,
made some progress, and when a business boom set in after
the war their advancement was of course still more remarkable.
Thus during these years the Japanese laid the basis for the
notable progress which their industries attained after the
Russo-Japanese War in later years. Let us first look at the
conditions of industrial investment in Japan. As we have
no authentic materials for a survey of the whole field of in-
dustry, we shall tabulate the amount of capital of the com-
panies engaged in various industries as follows:

Capital Investment in Industry

Paid-up

capital

Number of
companies

Authorized
capital

Reserve

Ye

Amount

Increase

Yen

Yen

Per Cent

Yen

I8q6

1,367

143,617,530

89,900,900

100. 0

7,404,980

iSqy

1,881

165,332,633

105,381,106

117. 2

7,581,535

I8q8

2,164

183,657,046

122,066,653

1358

11,642,993

I8qq

2,253

222,673,634

147,783,280

164.4

13,467,802

iqoo

2,554

216,766,903

158,851,730

176.7

17,697,540

1901

2,477

219,249,806

166,293,003

185.0

24,057,360

1902

2,427

222,120,693

173,222,689

192.7

24,794,154

1903

2,441

214,404,088

170,346,340

189.5

29,966,661

To

tal . 17,564

1,587,822,333

1.133,845,701

136,613,025

As the figures in the foregoing table indicate, the capital
invested in certain industries was doubled in the four or five
years subsequent to 1896, and thenceforward it continued to
increase at the same rate. Yet when compared with the
amount of capital invested in other kinds of business, ^ it will

1 Cf. table, p. 210.

IS

210 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

be seen that the increase in capital of the companies engaged
in these industries was far smaller than that of companies
engaged in agricultural and commercial business and in com-
munication. The percentage of this industrial investment
compared with the total amount of investment in all these
different kinds of business, too, was generally less than 20 per
cent ; so that it may be seen that industrial investment did not
increase steadily during said years. In a word, it may be
stated that industrial enterprises did not make any consider-
able progress during this period.

Ratio of Industrial Investment to Total Investment

Indus-

Agricul-

Commer-

Communi-

Ratio of

industrial

investment

to the total

Year

trial com-

tural com-

cial com-

cation com-

Total

panies

panies

panies

panies

Per cent

Per cent

Per cent

Per cent

Per cent

Per cent

1896 . .

lOO.O

100. 0

100. 0

100. 0

100. 0

22.6

1897 . .

117. 2

134

5

1350

145-5

134-0

19.8

1898 . .

• 135-8

141

0

155-7

174.2

156.4

19.6

1899 ■ .

. 164.4

139

0

174. 1

175-0

172.0

21.6

1900 . .

. 176.7

157

8

201 .9

202.0

196.0

20.4

1901 . .

. 185.0

159

7

216.5

214.8

208.7

10. 0

1902 . .

192.7

154

0

228.4

232.0

221 .1

19.7

1903 . .

• 1895

192.9

234-4

231.7

223.3

19.2

Of the industrial companies whose paid-up capital is rep-
resented in the foregoing table, those having one million yen
or more at the end of the year 1903, and making somewhat
rapid progress, were the companies engaged in the branches of
industry given in the following table. The condition of these
companies indicates fairly well the general condition of the
business world following the Sino- Japanese War.

As the figures in this table indicate, the industries which
made most progress during this period were the cleaning of
grain, manufacturing of soy bean paste, and tobacco, ship-
building, electric light manufacturing, printing, paper mill-
ing, and cement manufacturing. All these industries ex-
cept tobacco, whose success had a great deal to do with the
establishment of the government monopoly system, attained

EFFECTS ON INDUSTRIES

Progress of Industries, i 896-1903

211

Industry

December
31, 1896

December
31, 1899

December
31, 1903

Increase of

1903 over

1896

Grain refining

Sakebrev;'mg

Beer brewing

Soy and bean paste
manufacturing

Sugar refining

Tobacco manufacturing

Manufacturingof medi-
cines and chemicals. .

Cotton spinning

Other spinning

Raw silk

Hemp yarn

Silk textiles

Cotton textiles

Hemp textiles

Woolen textiles

Mining and refining . . .

Shipbuilding

Railway wheel making .

Electric light works . . .

Gas works

Printing

Paper milling

Tanning and manufac-
turing of leather
goods

Nets and rods

Petroleum boring and
refining

Cement making

Fertilizer manufacturing

Yen

344,668

2,056,895

(unknown)

325,392
1,474,106

1,113,099

(unknown)
28,770,847
(unknown)

3,869,877
(unknown)

245,355
2,355,178

790,000

814,416

8,585,560

2,272,866

(unknown)

4,624,097

(unknown)

690,067
2,872,793

523,250
668,210

9,500,000

1,330,000

(unknown)

Yen
1,255,978
6,133,044
2,756,940*

928,460

2,419,968

11,320,965

(unknown)

30,313,054

5,195,891

4,547,215

3,066,120*

748,079
3,975,940
(unknown)
2,367,000
10,020,418
5,011,600
(unknown)
7,909,018
2,302,400*

992,061
6,265,095

636,485
648,410

14,241,109

4,078,085

660,560

Yen
1,498,426
3.748,253
3,156,470

1,943,796
2,710,300

13,385,933

2,132,865
32,666,875
7,010,070
4,620,788
1,607,230
2,075,844
1,201,199
1,788,400
1,926,750

10,933,235
10,530,100
1,470,000
12,151,561
5,544,500
1,806,814
8,729,661

1,128,815
1,033,500

4.497,743
3,767,374
1,850,462

Per Cent

435
182

598

184

1,202

114
119

846

51
226

237
127

463
263

262
304

216

155

47
283

» As of December 31. 1900.

their several degrees of progress as a result of the general
advance in the conditions of society at large after the war.

Let us then note the number of factories in operation, with
the number and horse power of machines in use, and we shall
see what remarkable progress the totals in the following table
indicate. 1

Now let us compute the number of factory hands. Be-
tween 1896 and 1906, this was about 430,000, without any
considerable change during these years. About 40 per cent

^ Cf. detailed figures given on pp. 221 and 222 relative to the ages and summary
of factory hands, etc.

212 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR
Factories in Operation and Horsepower of Engines

Year

Number of
factories

Percentage

Number of
engines

Percentage

Horse
power

Percentage

1893 . •

3.019

100. 0

2,080

100. 0

32,811

100. 0

1894 . .

5,985

198.7

4,020

193 -3

41,031

125. 1

1895 . •

7,154

2370

4,989

239 -9

61,252

186.7

1896 . .

7,640

253.1

5.459

262.5

64,429

196.4

1897 . •

7.287

241.4

5,880

282.7

63,434

193 -3

1898 . .

• 7.085

234 -7

5.172

248.7

79,016

240.8

1899 • .

. 6,699

221 .9

4.093

196.8

76,885

234 -3

1900 . .

. 7.284

241.3

3.977

191 .2

95,392

290.7

1901 . .

7,349

243-4

^'§^0

218.8

91,585

279.1

1902 . .

7,821

259 I

4,808

231.2

100,901

307.5

1903 • .

8,274

274.1

5.226

251 -3

102,797

313.3

of these hands were males, and the remaining 60 per cent
females. Considered as to age, 90 per cent of the total number
were 14 years or older, and the remaining 10 per cent young
hands less than 14 years of age. About 93.4 per cent of the
total number of male hands, and about 85.6 per cent of the
total number of female hands were more than 14 years of age.
From these figures, it may be inferred that the number of
young hands (those under 14 years of age) was small among
male hands, but comparatively large among female hands, as
Table I at the end of this chapter ^ indicates.

Of the figures given in the foregoing pages, the most im-
portant may be summarized as shown in the table on the
next page. As some figures are lacking in the table, we can
not make comparison with the time previous to the war.
While it is true that during and after the war industrial
schemes were started in various parts of the country, yet we
must realize that the industrial development attained by the
Japanese during those years can not be called remarkable.
Except in the production of half-manufactured articles, an
industry which had been developing in Japan even before the
war, the progress made during this period was only in those
branches of industry devoted to the production of articles
for home consumption or those necessitated by the improve-
ment in standards of living, but not for export. This may be

^Post, p. 218.

EFFECTS ON INDUSTRIES 213

Ratio of Capital Invested, Factories and Factory Hands, i 893-1 Q03

No. of factory hands

Year

Paid-up

No. of

No. of

Horse-

capital

factories

engines

power

Male

Female

Total

1893 . ••

(unknown)

100. 0

100. 0

100. 0

(unknown)

(unknown)

(unknown)

1894 • . •

(unknown)

198.2

193.3

125. 1

(unknown)

(unknown)

(unknown)

189s . . •

(unknown)

237.0

239.9

186.7

(unknown)

(unknown)

(unknown)

1896 . . .

100. 0

253. 0
100. 0

262.5
100. 0

196.4
100. 0

100. 0

100. 0

100. 0

1897 ...

117. 2

241.4

95.4

282.7
107.7

190.6
98.5

105.5

97.5

100.7

1898 . . .

I3S.8

234.7
92.7

248.7
94.7

240.8
122.6

101.7

89.5

94-4

1899 —

164.4

221.9

87.7

196.8
75.0

234.3
119. 3

86.6

98.0

93.4

1900 —

176.7

241.3
95. 4

191. 2
72.9

290.7
148. 1

88.7

94.9

92.4

1901 . . .

185.0

'ti.i

218.8
83.4

279.1
142. 1

90.6

08.2

95-2

1902 . . .

192.7

259. 1
102.4

231.2
88.1

307. 5
156.6

106.3

119. 6

114. 3

1903 . . .

189. S

274-1
108.3

251.3
95.7

313-3
159. 6

104.4

iiS-i

II0.8

seen from the fact that of the total value of exports from
Japan to foreign countries in these years, half-manufactured
articles were usually 45 or 50 per cent. However, the value of
imported half -manufactured articles was between 15 and 20
per cent against about 25 per cent of manufactured articles,
while the value of imported manufactured articles was 26 to 30
per cent, although this percentage began gradually falling
towards the end of the decade 1 893-1 903.

In summing up, it may be stated that while we must admit
that after the Sino- Japanese War the Japanese were encour-
aged by the favorable economic condition to start various
industrial enterprises, these schemes were on rather a small
scale. Then, again, the various industries thus started were all
for the purpose of supplying domestic needs, and no develop-
ment was attained in industries for the production of export
articles. Though the glorious victory and the intervention
of the Powers hastened the national awakening of the Japa-
nese people to a great extent, yet it was still too early for any
elaborate reorganization of the industrial world. The govern-
ment was too busy with work such as the administration of
state finances, the reform of the currency system, adjustment
of the money market, preparation of armaments, etc. As to

214 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

the people, it was only a short time after the country had been
opened to foreign intercourse, and they did not have capital
enough to do any work independent of the government. For
these reasons, neither the government nor people of Japan
could yet lay a firm foundation for the establishment of what
may be called an industrial empire in Japan. This they ought
to have done as a result of the war, and it is much to be
regretted that it was impracticable, because the establishment
of an industrial empire is an indispensable requisite in the
improvement of international finance. When we consider the
elevation in Japan's international position after the war, the
maintenance of the gold standard adopted after the war, and
the increase in the people's purchasing power which accom-
panied the importation of the indemnity from China, we regret
this the more. Even at the present time (191 5), about 20
years after the Sino- Japanese War, we have still failed to
establish such an industrial empire, hindered especially by
the Russo-Japanese War, and this fact alone tells something
of the industrial conditions of Japan in those post-bellum
years.

The State of Industrial Capital

The general condition of capital investment in industrial
works was briefly set forth in the previous section. We shall
now consider the amounts of paid-up capital in the hands of
companies engaged in the principal branches of industry.
Table II at the end of this chapter^ gives the figures for the
years i 896-1903.

None of these figures suggest large investments certainly.
Industries were started during these years either for the pur-
pose of meeting home demands or of laying the foundations
for later development, as when Japan might become a leader
in the production of articles for export to foreign countries.

The State of Industrial Labor

In the statistics published by the Department of Agricul-
ture and Commerce as to the condition of industrial factory

^Post, p. 219.

EFFECTS ON INDUSTRIES 21 5

labor in Japan, figures for 1895 and earlier are lacking, so
that we have not the materials for a comparison of the
conditions of factory labor before and after the Sino- Japanese
War. An investigation of the average number of factory
hands employed in industrial work, as furnished in the official
statistics published since the year 1896, shows us that about 10
per cent of the whole population of the empire was employed
in this kind of labor. See Table 1 1 1 at the end of this chapter.^

If the factory hands enumerated in Table III are divided
into two classes, adult and young, with the age of 14 as the
dividing point, we shall find that the adult hands (14 years
old or older) are about 90 per cent of the total. See Table
IV at the end of this chapter.^

The proportion between male and female hands is 40 per
cent male and 60 per cent female. Although the number of
male hands did not increase much during these years, the
number of female hands increased somewhat rapidly. Of the
male hands, about 94 per cent were adults, while of the
female hands, adults formed about 87 per cent of the whole
number. Therefore it may be inferred that young female
hands were more numerous than male. See Table V at the
end of this chapter.^

Percentages as to average daily wage of adult factory
hands in the principal branches of industry (such as flour
milling, yam spinning, manufacturing of textile fabrics, knit-
ting, machine making, shipbuilding, furnace working, gas
works, paper milling, dyeing, etc.) during this period, as in-
vestigated by the Department of Agriculture and Commerce,
are given in Table VI at the end of this chapter.^ Compared
with independent workmen such as carpenters, plasterers,
etc., the increase in wage appears rather small.

As regards the kinds of independent labor given in the table
for reference, further notes will be given in Chapter VIII,
pages 278-319.

These facts clearly show us that the condition of factory
hands was generally bad compared with that of independent

1 Post, p. 220. 2 Post, p. 221. 3 Post, p. 222. * Post, p. 223.

2l6 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

workmen. Let us now compare the price of factory labor
with the prices of commodities. See Table VII at the end of
this chapter.^

As shown by the figures given in Table VII, the prices
of commodities rose more rapidly than the wages of factory
hands. It is obvious that the rise in the prices of commodities
brought about a rise in house rent and other items concerned
in the cost of living, and a consequent pressure upon the life of
the working class. This wage, low compared with the wage of
independent workmen, which rose more rapidly than the
prices of commodities, made the position of factory hands
very difficult during these years.

Let us now investigate the number of hours these factory
hands had to work a day. In those days we had no factory
law in operation. Then again, factory owners were not
farsighted about the management of their factories, nor did
they experience any trouble with their factory hands. It is
obvious that the latter were forced to work excessively long
hours a day — doubtless as much as 12 or 13 hours, although
we have no authentic statistics at hand to prove it. This we
may infer, however, from the fact that when a 12-hour day
clause was inserted in the factory law which was prepared in
quite recent years, objection was raised by many of the
authorities best acquainted with the condition of factories in
Japan. As it was, the appearance of the factory labor class,
which had not existed in old Japan, presented a serious
question which the leaders of the country were called upon to
investigate from the points of view of social customs, public
sanitation and the preservation of the family system in the
country. In a word, it may be stated that after the Sino-
Japanese War, unusual activity was manifested in indus-
trial circles in Japan, with a consequent heavy demand for
factory hands. This demand for factory labor brought
about in some degree an increase in the income of the working
class. At the same time, however, as there was no factory
system established in those days, the appearance of this

1 Post, p. 223.

EFFECTS ON INDUSTRIES 217

factory labor class encouraged an undesirable tendency in
society, which should be seriously investigated in the interests
of public sanitation, health, and morality. In other words,
the factory labor class is the most interesting by-production
of the industrial developments which followed the Sino-
Japanese War. And the appearance of this factory labor
class requires the leaders of the country to devise improve-
ments in the factory system and the condition of the people of
this class, for the sake of the industrial development of the
country as well as public sanitation and the health of the
people in general.

2l8 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

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222 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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EFFECTS ON INDUSTRIES

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CHAPTER V
EFFECTS ON COMMERCE

The ill effects that the commerce and trade of Japan in
general suffered from the Sino-Japanese War were compara-
tively small. Although the interruption in transportation by
land and water caused by the transporting of troops and
civilians in connection with the war (amounting to 300,000)
interfered with the supply of necessary merchandise for a
short time, resulting in a subsequent rise in prices, yet these
difficulties were soon removed; especially as the government
paid careful attention to the money market and as conditions
were favorable to Japan all through the war, the Japanese
Navy having complete control over the China Sea. For these
reasons Japan's trade with America and Europe was rather
more prosperous than before and trade with China and Korea
did not suffer much. In order to show the state of commerce
and trade in general during the war, we shall now call atten-
tion to the table on the following page which gives the amount
of negotiable paper handled, the notes cleared, and the present
general condition of the country's foreign trade during these
years.

As we see from the figures, neither the volume of commerce
at home nor that of foreign trade decreased ; indeed there was
more or less increase in each case.

While it is true, as just stated, that during the war no adverse
effects were suffered by trade in general, yet after the war
important effects were more apparent. The minds of the
Japanese people in general were decidedly stimulated, for as
the fruits of the war Japail obtained an indemnity of 200
million taels in Chinese Kuping silver, and the concession of
the Island of Formosa. Enthusiasm for business enterprises
speedily developed among the people, and this, coupled with
the government's post-bellum program, created unusual activ-

224

EFFECTS ON COMMERCE 225

Negotiable Paper and Foreign Trade During War Period

1893

1894

1895

Notes handled by Tokyo
associated banks:
Receiots

Yen
71,234,966
100,467,393

Yen
85,203,203
103,144,795

Yen
98,809,120

137,943,935

Notes handled by Osaka
associated banks:

44,033,992
66,320,081

46,981,007
82,863,147

64,438,604
102,981,074

Exoenditiircs . .

Negotiable paper handled
by Tokyo Clearing
House:

Amount presented

Amount cleared

188,591,742
i48,oi8,870»

227,767,017
i85,597,502'»

356,841,068
289,i02,425»

Negotiable paper handled
by Osaka Clearing
House:

63,600,661

67,543,806

79,6s4,Il8

Foreign Trade :
China and Korea:

Exports

9,015,663
19,095,414

57,933,054
46,482,956 .

11,179,099
19,694,820

76,825,062
67,608,724

12,966,586
25,910,544

94,327,590
75,543,047

Imoorts

Europe and America:
Exports

Imports

Total

177,970,038

220,728,042

265,372,754

* 78.5 per cent of amount presented. '' S1.5 per cent of amount presented.

° 81. 1 per cent of amount presented.

ity in business. In addition to the importation of cash with
such great purchasing power as the indemnity from China,
there was a large inflow of foreign capital as a result of the
adoption of the gold standard for the country's currency
system. Various kinds of enterprises were therefore started
in all parts of the country and carried on by means of the
financial facilities afforded by a special form of bank, the
immovable property banks, which the government insti-
tuted after the war. These all overcame the various diffi-
culties that beset the money market after the war, and,
without occasioning any serious hindrance to commerce in
general, brought about an entire change in the conditions
of commerce and trade from those obtaining before the war.
16

226 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Table I at the end of this chapter ^ is illuminating in this
connection.

These statistics do not cover all of the items concerned, yet
give some idea of the general conditions of commerce and
trade after the Sino-Japanese War.

Let us now investigate the subject of capital employed by
the companies engaged in commerce and trade since 1896.
The percentage of increase in the paid-up capital of these
companies was far greater than that in the capital of com-
panies engaged in such business as agriculture, industry and
transportation by land and water. And of the various
branches of commerce and trade the most highly developed
during these years were money lending, warehousing, in-
surance, sugar, fishery and marine products, raw cotton,
cotton yarn, raw silk, textile fabrics, publication and sale of
books and newspapers, etc., timber and lumber trading, sale
and purchase of immovables, and banking. Each of these
branches of commerce made progress in consequence of the
general development of the country which followed the war.
Let us first examine the outstanding facts as to the capital in-
vested in commerce during this period, as given in Table II
at the end of this chapter. ^

While the figures just given represent only a portion of the
commercial agencies in existence, yet from these figures we
may judge the general condition of commerce during these
years. To explain this unusually rapid development, we may
mention (i) the starting of various sorts of enterprises by the
government as well as private individuals after the war, (2)
the increase in the purchasing power of the people, especially
the lower classes, resulting from -the monetary gifts and other
payments made them for their services in the war, and also
from the greater demand for labor of this period. This
increase in the people's purchasing power naturally brought
about a rise in the prices of commodities, and an excess of
imports over exports in the country's foreign trade. In the
following pages we shall further examine the effects of the

^ Post, p. 239. ' Post, p. 240.

EFFECTS ON COMMERCE

227

war upon the domestic commerce and foreign trade of the
country.

Domestic Commerce

Domestic commerce in general

That during and after the Sino- Japanese War domestic
commerce in Japan did not suffer seriously in any way, but
rather attained to a more healthy development, was briefly
stated in the foregoing section. Let us now consider the same
subject in a little more detail and from various points of view.

Let us, first of all, note the condition of the money market,
as presented in Table III at the end of this chapter. ^ The
figures show us that as soon as business began to re-
cover from the effects of the war, the supply of capital in
the market became liberal, which fact indicates the general
condition of commerce during these years. Next let us
investigate the buying and selling of merchandise, which
always promptly reflects commercial conditions. Below are
given statistics as to the volume of goods carried by railways,
although the goods carried were not for domestic commerce

only.

Volume of Goods Transported by Railways *

State
railways

Private
railways

Total

Year

Tonnage

Percentage of
increase

1893

1894

1895

1896

1897

1898

1899

1900

1901

1902

1903

Tons
1,076,689
1,018,298
1,100,059
1,266,119
1,558,194
1,793,896
2,391,471
2,806,560
2,659,602
3,183,720
3,492,622

Tons
2,414,394
3,265,404
4,231,353
5,579,112
7,070,315
8,122,230

9.428,563
11,594,960
11,750,150

12,938,951
14,268,690

Tons

3,491,083

4,283,702

5,331,412

6,845,231

8,628,509

9,916,126

11,820,034

14,401,520

14,409,752

16,122,671

17,761,312

100. 0
122.7

152.7

196. 1
247.2
284.0
338.6

412.5
412.8
461.8
508.8

Total

22,347,230

90,664,122

113,011,352

» Prepared and published by Imperial Govenunent Railways.

^ Post, p. 241.

228 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Again let us investigate those branches of business upon
which a tax was levied in accordance with the Business Tax
Law^ promulgated in March, 1896, and enforced on January i
of the following year. Since this law has been in force only
from 1897, we have no authentic materials for comparison
with conditions prior to that year, especially from 1893 to
1896, yet the statistics given below doubtless furnish materials
from which we may ascertain the true condition of commerce
during these years. The business tax of the law referred to
was imposed upon 24 different forms of business, but we shall
confine ourselves to the sale of commodities. The standards
for rating the tax were three, viz., (a) the total value of the
merchandise sold during the previous year, (b) the average
rent of buildings in the previous year and (c) the maximum
number of employes engaged in the business in the year
previous. The figures are shown in Table IV at the end of
this chapter. 2

According to the law referred to, the business tax was
imposed upon such persons, engaged in business, as sold
merchandise to the value of 1,000 yen or more a year. Al-
though the law states that the tax was to be levied in accord-
ance with said triple standards, in reality it was not, because
of the many difficulties attending the application of such a
law. The figures prepared by the tax collectors and given in
the preceding table do not of course indicate the total amount
of the commercial transactions of the country during this
period, yet assuredly they do give some idea of the general
commercial conditions of the time.

From these it may be inferred that the development of
Japanese commerce during said years was comparatively
great. Of course it must be remembered that the said business
tax was first levied after the war, when the country's commerce
had attained considerable progress. While we regret that we
have no authentic written materials from which to ascertain
the state of commerce previous to the war, especially during
the years from 1 893-1 896, and also that we can not give here
1 Law No. 33. 2 posi^ p^ 242.

EFFECTS ON COMMERCE 229

the exact commercial development that Japan made since that
time, yet considering the economic development effected both
before and after the war, it is reasonable to infer that during
the same period the country made considerable progress in
commerce, too.

Table V at the end of this chapter^ will show the state of
capital of the various kinds of important commercial com-
panies.

From the data given above it may be concluded that
during and after the Sino-Japanese War, Japanese commerce
did not suffer any reverses, but even made some progress.

Trade between Japan proper and the colonies

The colonial history of Japan began with the acquisition of
Formosa and the Pescadores, which were ceded to her by
China as a result of the Sino-Japanese War. The area of the
new possessions is 2,324.11 square miles for Formosa, and
7.99 square miles for the Pescadores, making a total of 2,332.^
square miles (391.5 square ri) or about 9.4 per cent of the
total area of the Empire before the acquisition of these pos-
sessions— 24,794.36 square ri. These islands extend from
the tropical to the sub-tropical zone, and abound in valuable
resources, especially in those products in which Japan proper
is wanting, and thus their effect upon the market in Japan is
favorable in many respects. Let us examine the statistics
relating to the trade between Japan proper and Formosa
since the acquisition of the latter island, as given in the table
on the following page.

Of all the favorable effects that the possession of the island
of Formosa has had on domestic commerce in Japan proper,
the most striking has come from her production of sugar.
Before our acquisition of Formosa, we had to import most of
the sugar consumed in our land from foreign countries, but
since we acquired Formosa, there had been a gradual change,
and now Formosa not only supplies all the sugar consumed in
Japan, but even exports the excess of her production to foreign

1 Post, p. 243.

230 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

markets. The sugar industry in Formosa will be treated in
detail in the following section.

Trade between Japan and Formosa, i 897-1903

Year

Exports from Japan
proper to Formosa

Imports into Japan
proper from Formosa

Excess of ex-

Value

Percentage
of increase

Value.

Percentage
of increase

ports over
imports

1897...
1898...
1899...
1900. . .
1901 . . .
1902 . . .
1903- •

Yen
3,723,721
4,266,768
8,011,826
8,439,033
8,782,258
9,235,290
11,194,788

100. 0
114. 6

215. 1
226.6
235.8
248.0
300.6

Yen
2,014,648
4,142,778

3,650,475
4,402,110

7,345,956
7,407,498
9,729,460

100. 0
205.6
181. 2
218.5
364.6
367.6
482.8

Yen
1,619,074
123,990
4,361,351
4,036,923
1,436,302
1,827,792
1,465,328

Foreign Trade
General condition of foreign trade

As mentioned heretofore, the Sino-Japanese War, in which
Japan won a great victory over China, awakened the Japanese
people to a realization of the striking progress which they had
achieved since the time of the Restoration (1868). The
Japanese so awakened strove for further progress after the
war, and naturally, unusual activity in the economic world
followed. In consequence, the foreign trade of Japan, of
which we propose to treat in the present section, could not
but feel the effect of this general tendency. Before the Sino-
Japanese War, foreign trade was quite insignificant, but after
the war, striking progress was made in the volume of mer-
chandise, scope of the market, and total value of exports and
imports. The statistics given below show the average annual
value of exports and imports for every five years since the
first year of Meiji (1868). A glance at these shows us that
during the period from 1868 to 1893, or just before the out-
break of the war, the largest annual figure for exports and
imports attained was 80 million yen while in most of the years
of the period it was 20 or 30 million yen, which means 30 or 40

EFFECTS ON COMMERCE 23I

per cent of the value of the trade in the year 1893. In none
of the years of this period did the value of exports and imports
exceed 100 million yen, but after the year 1894 it exceeded 100
million yeji and in 1897 it reached 200 million yen, creating a
record in the trade history of Japan. See Table VI at the
end of this chapter.^

As the figures in Table VI show, our foreign trade made
unusual progress after the Sino-Japanese War, but that prog-
ress can not be regarded as accidental. It was a natural
outcome of the steady economic development which had been
in progress since some time before the war, a result of the
development of the latent power of the nation. The statis-
tics in Table VII at the end of this chapter ^ show the state
of our foreign trade for a period of ten years, beginning before
and continuing after the war.

While, it may not be correct to say that increase in our
foreign trade after the Sino-Japanese War was entirely brought
about by the war, nevertheless, there can be no doubt that the
war marked a stage of great development in the economic
world, then just ready for such development, and that this
development brought about progress in the foreign trade of
the country.

Let us now consider the state of our foreign trade in the ten
years following the war. During that period both exports
and imports increased about equally, as the figures in Table
VIII at the end of this chapter^ show; the value of exports
was doubled in 1898, and trebled in 1902, while the import
trade advanced even faster, being doubled and trebled a year
or two earlier than the export trade.

Thus our foreign trade, as indicated by value of exports
and imports, advanced greatly year by year, especially after
the war. And this progress was largely due to the increase in
the national strength discernible during, and particularly
after, the war. Thus among the numerous causes which
brought about the advance in foreign trade, we may mention
(i) commercial activity, arising from the starting of various

1 Post, p. 244. 2 Post, p. 245. 3 Post, p. 246.

232 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

kinds of enterprises and development in systems of trans-
portation on both land and water; (2) the importation of the
indemnity from China ; (3) the opening to trade of such ports
in China as Shashih, Chungking, Hangchow, and Soochow, in
addition to those already opened as a result of a Sino-Japanese
peace treaty; (4) increased demand for arms and other
munitions during and after the war^ (5) the Japanese ac-
quisition of commercial supremacy in Korea; (6) increase in
the income of the people, especially those belonging to the
lower classes; (7) the reform in the currency system, which
removed anxiety caused by frequent fluctuations in the ex-
change rate, and favorably affected trade; (8) the abolition of
the export duty, which helped to extend the market for Jap-
anese goods ; and (9) the revision of commercial treaties with
other countries, so long desired by the Japanese Government
and people, which laid a firm foundation for the future com-
mercial development of Japan.

About the time of the Sino-Japanese War, the standard of
our currency system, as a matter of fact, was silver, and we
suffered considerably from its steady depreciation. Since
1873 (6th year of Meiji) the Powers one after another adopted
the gold standard for their currency system, putting a limita-
tion on the making of silver coins, and the price of silver
gradually fell. In the United States attempts were made to
secure a rise in the price of silver by the Brand Silver Purchase
Regulations, 1878, and the Sherman Silver Purchase Exten-
sion Regulations, 1890; but the general world tendency was
against silver, and the United States Government abolished
the said silver purchase regulations in 1893. India, too, stopped
the unlimited coinage of silver. Consequently the price of
silver quickly fell, and while before 1872 it was generally
quoted at 60 d., i.e., the ratio of the value of gold to that of
silver was i to 15^, it fell to 35/^ d. or i to 26| in 1893. As
silver was practically the standard for the Japanese currency
system, the fall in the prices of silver placed Japan in a com-
paratively favorable position in her trade relations. For

1 Were needed after the war for the replenishment of arsenals, etc.

EFFECTS ON COMMERCE 233

the fall of silver meant a fall in its price as compared with that
of gold, and thus Japanese coins became cheaper than those of
countries where gold was the standard. Now China with
other Oriental countries, which are the principal markets for
Japanese goods, adopted the silver standard, and thus Japa-
nese coins, in competition with the coins of European and
American countries with the gold standard system, won in
these Oriental markets, and thus in the point of export busi-
ness in the Orient Japan was in a better position than any of
the countries with the gold standard. Now the excess of ex-
ports over imports in Japan's foreign trade during the period
from 1 882-1 889 was due to the said condition of Japan's trade
with these Oriental countries. On the other hand, however,
frequent fluctuations in the price of silver brought about sim-
ilar fluctuations in quotations on exchange rates, and caused
great anxiety to traders, for in the home market any fall in
the value of coins ^ means a rise in the prices of commodities.
Besides, increase in the volume of currency in circulation
after the war brought about a further rise in the prices of
commodities. This created a situation beneficial to import
trade. Despite the benefit which the fall in the price of silver
gave to Japan in her trade with Oriental countries, it was not
easy to decide w^hether the silver standard was advisable for
the country after all. Finally, the government, disregarding
the immediate minor losses which it might incur, adopted the
gold standard on October i, 1897. And this reform to no
small extent laid the foundation for the healthy progress
which the foreign trade of Japan has made ever since.

Something must be said here about the revision of the rate
of import duty and the abolition of the export duty. . For-
merly the tariff rates originated in Japan's treaties with dif-
ferent countries. Her first tariff rates were concluded with
five countries, viz., England, the United States, France,
Russia and the Netherlands in 1858 (5th year of Ansei), and
revised in 1866 (2d year of Keiwo). According to the treaties

^ A fall in the price of silver, when this is the material for the unit coin, is always
accompanied by a similar fall in the unit of value.

234 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

concluded in 1858, the export duty was 5 per cent ad valorem^
and the import duty was from 35 per cent (maximum) to 5
per cent (minimum) . In case it was not mentioned specially in
treaties, it was decided at 20 per cent. But after the revision
of 1866, both export and import duties were each 5 per cent ad
valorem. The import duty was imposed in accordance with
the prices of the articles to be taxed, at the port where they
were shipped. Now in those days the Japanese were not very
familiar with the prices of foreign articles, so the prices upon
which the import duty was imposed at Japanese ports were in
reality far from the real prices of these articles at the port
whence they were shipped. So, although the import duty was
fixed by treaty at 5 per cent ad valorem, in reality it was in
most cases less than i per cent ad valorem. During the period
from 1889 to 1899 the average rate of import duty imposed was
only 3.985 per cent. On the other hand, articles exported
from Japan in those days were not as a rule special products of
the country, so that there was no way of shifting the export
duty, and the imposition was entirely confined to the Japanese
exporters. Thus before the revision of 1899, the Japanese
tariff always benefited foreign traders, but was a bar to export
trade from Japan. So revision was carried out, and the
revised tariff law^ was promulgated in 1897 and enforced on
January i, 1899. The rates of duty upon taxable imported
articles were fixed in the revised law at from 5 per cent (mini-
mum) to 40 per cent (maximum). Applying these rates to
the articles imported during the year 1895, you will see that
the rate of import duty thus realized would be on the average
12.35 per cent. Apply again the conventional tariff rates in
the revised law to those articles signified in the treaties
between Japan and England or Germany for the conven-
tional rates, and you will get an average rate of 10.052 per
cent for the same year. Compared with the average rate of
3.98 per cent of import duty previous to the revision, these
new rates are far higher. Then, on the other hand, the export
duty was entirely abolished on July 17, 1899, and the articles

^ Law No. 14.

EFFECTS ON COMMERCE 235

exported from Japan were freed from the imposition of a duty
of 3.574 per cent, as the average export duty was during the
period from 1889 to 1899. This greatly helped the develop-
ment of home industries, on the one hand, and, on the other,
served to extend our foreign trade. The fact that our foreign
trade has made remarkable progress since about 1899 was
largely due to the revision of these import and export
rates.

Just here we must say a few words about the successive
excesses of imports over exports in our trade after the Sino-
Japanese War. A glance at the state of our foreign trade
since 1893, just before the war, shows that, except 1894 and
1895, each year has so far always seen an excess of imports
over exports. This excess indeed reached 83 million yen in
1890, which was about 40 per cent of the total value of
exports.^

A glance at the state of our foreign trade from the first year
of the Meiji Era shows us that up to 1881 imports always ex-
ceeded exports, but in 1882 the condition suddenly changed
and exports exceeded imports, and this state continued till
1893. Then, however, imports again exceeded exports. To
explain this balance, which has long been in favor of imports
as against exports, numerous reasons may be given. But first
of all it may be stated that the inconvertible notes which were
in circulation in Japan in the early part of the Meiji Era
began to be adjusted in 1881; in 1886 the government es-
tablished the convertible note system, and the prices of
commodities were then brought to a normal state in conse-
quence. Before the revision of the currency system, the
standard for Japanese currency w^s silver, so that any fall in
the price of silver in those days no doubt benefited exports
rather than imports in Japan. But after the war the govern-
ment revised the currency system, adopting in 1897 the gold
standard. Thus she lost the benefit that she had been

^ In 1898 the excess of imports over exports reached about 112 million yen, but
this must be regarded as an exception, for a large amount of anticipated import
orders was received in that year, in view of the enforcement of the revised tariff
law in the following year.

236 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

obtaining from the silver standard, i.e., her advantage over
gold-standard countries in export trade. Besides, she also
incurred losses and inconvenience in the silver-standard
countries as well. Then the volume of currency in circulation,
which was swelling even at the time of the war, did not de-
crease, but rather increased after the war, because of business
activity resulting from the various enterprises started by both
government and people. This increase in the volume of
currency in circulation caused a considerable rise in the prices
of commodities. Then the receipt of the war indemnity from
China, the importation of foreign capital, and the increased
demands for foreign-made articles, as a result of the advance
in the people's style of living, brought a large amount of
foreign capital into Japan at a time when the country's
power of manufacturing export articles did not greatly in-
crease. Moreover, with the various kinds of enterprises
started both by the government and the people after the war,
the country, which had been exporting mainly raw materials,
was now about to become an industrial power. These various
reasons taken together were responsible for the continuous
excess of imports over exports, which was still a feature of our
foreign trade in 191 5, when this book was prepared.

Having given, as we believe, a true though brief summary
of the condition of our foreign trade after the Sino- Japanese
War, we shall now briefly investigate in the following pages
the facts as to articles either exported from or imported into
Japan in these post-bellum years.

Commodities exported and imported

As already briefly stated, during the Sino- Japanese War our
foreign trade did not sufi^er seriously from the war, but rather
made healthy progress, as the total value of exports and
imports increased. Not only did the commercial policy of
the government not interfere during the war with general
trade but in fact it brought about some development in our
trade with China and Korea, even while the war was in
progress, as the following statistics show:

EFFECTS ON COMMERCE

237

Trade with China and Korea, i 893-1 895
Exports

China

Korea

Year

Value

Percentage

Ratio to
the total

Value

Percentage

Ratio to
the total

1893

1894

1895

Yen
7,714,000
8,814,000
9,135,000

100. 0

II4-3
118. 4

8.6
7.8
6.7

Yen
1,301,000
2,365,000
3,831,000

100. 0
181. 8
248.5

1 .1
2.1

2.8

Imports

1893

1894

1895

17,096,000
17,512,000
22,985,000

100. 0
102.4
1344

19.4
14.9
17.8

1,999,000
2,183,000
2,925,000

100. 0
109.7
146.3

2.3
1-9
2.3

Consequently, Japanese exports to these countries were all
in a favorable state, the principal of these exports being
matches, cotton yam and cotton manufactures.

Scarcely less favorable was the state of our trade with
Europe and America. With development in our home in-
dustries and a better understanding of the conditions in
Japan compared with those in European and American
countries, the volume of our exports to these countries in-
creased. On the other hand, progress in our home industries
and advance in the standard of our civilization increased
the demands in Japan for foreign-made articles, and our im-
port trade also became very active in consequence.

The statistics for sundry exports and imports, whose value
reached about 3 million yen each at the end of 1893, are set out
in Tables IX, X, and XI at the end of this chapter.^

As these tables show, the principal exports during these
years were raw silk, tea, copper, coal, matches and cotton
yam, while the principal imports were raw cotton, rice,
flour, kerosene oil, iron, sugar and woolen manufactures. In

1 Post, pp. 247-253.

238 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR

a word, it may be stated that the Japanese were buying
foreign-made articles for their own consumption by selling
abroad raw materials or half-manufactured articles, but
neither case includes these passing articles of trade.

EFFECTS ON COMMERCE

239

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.2

CHAPTER VI

EFFECTS ON TRANSPORTATION AND
COMMUNICATION

At the outbreak of the war all the available transportation
facilities in Japan, both land and water, were placed at the
disposal of the government for the transport of troops and
munitions from Japan to Korea and Manchuria, and, in
consequence, the general public suffered considerable in-
convenience. This state of affairs, however, did not last long,
for the authorities concerned quickly adopted the necessary
measures for relief; thus the transportation business was soon
restored to its normal status, and never since has the general
public suffered such inconvenience as at the outbreak of the
war.

Thus, except for this short period, transportation business
in Japan was not hampered by the war at all, and all trans-
portation facilities, both land and water, throughout the
Empire, remained during the war in the condition as before the
outbreak of the war. But after the war, which ended in
Japan's victory, a great increase in activity was noted in
the transportation, as in almost every other branch of business,
as a result of the great postbellum boom in industry and trade.
To meet this tendency toward expansion, many plans were
formulated — by individuals as well as by the government.
The latter planned for the improvement and extension of the
railways and the telephone service, made efforts to augment
foreign trade, and subsidized the merchant marine as well as
the companies engaged in shipbuilding. The government
raised the funds necessary for all these measures by public
loans.

How remarkable was the progress Japan made in trans-
portation after the conclusion of the war in 1896 may be
observed from the considerable increase in the paid-up capital

254

TRANSPORTATION AND COMMUNICATION

255

of those companies engaged in the transportation business
during the several years following the war. Compared with
the year 1896, in which the war was concluded, the paid-up
capital of the companies engaged in transportation increased
by 100 per cent in 1900, and by 130 per cent in 1903, as will be
seen in the table below :

Capital Investment in Transportation Companies, i 896-1903

Authorized
capital

Paid-up capital

No. of
companies

Year

Amount

Rate of
increase

Reserve

1896

1897

1898

1899

1900

1901

1902

1903

Yen
171,674,964
266,973,250
271,896,976
269,622,304
305,810,809
356,220,426

361,454,333
383,422,606

Yen
113,216,760
164,684,165
197,233,421
198,146,560
228,733,512
243,224,584
262,676,192
262,382,936

100. 0

145 -5
174.2
1750
202.0
214.8
232.0
231.7

Yen

6,259,011

6,551,967

7,302,391

8,113,324

14,877,726

14,221,810

18,587,260

24,004,444

334
454
536

627
596
646
702

As the table indicates, the authorized capital of these
companies increased by more than 100 million yen in the two
years after the conclusion of the war, and then by another 100
million yen in the few years subsequent. Especially notewor-
thy is this rate of increase, secured by the transportation
companies during the several years following the war, when
compared with that secured by companies engaged in agri-
culture, industry and commerce.

The extension of railways, those owned by the government
as well as private roads, and the increase in the tonnage of
merchantmen during these years were also remarkable, as the
tables on the following page indicate.

Of the systems of communication, which are under govern-
ment control, the telephone service was extended at an outlay
of 13 million yen.

The condition of each of these branches of business will be
presented in the following sections.

256 ECONOMIC EFFECTS OF THE SINO- JAPANESE WAR
Extension of Railways, 1893- 1903

Year

1893
1894

1895
1896

1897
1898
1899
1900
1901
1902
1903

Mileage of railways

Government

Miles

558

581

593

632

662

768

833

950

1,060

1,227

1,345

Private

Miles
1,381
1,537
1,697
1,875
2,287
2,652
2,806

2,905
2,967
3,011
3,151

Total

Miles

1,939
2,118
2,290
2,507
2,949
3,420

3,639
3,855
4,027
4,238
4,496

Rate of
extension

Per cent
100. o
109
118
129
152
176
187

198.8
207.7
218.6
231.9

Increase in Shipping, i 893-1903

Year

1893
1894
1895
1896
1897
1898

1899
1900
1901
1902
1903

Tonnage of merchantmen

Steamships

Tons
104,909
163,029
207,765
227,840
268,223
287,857
308,402
330,622

357,394
376,118
408,990

Sailing
boats

Tons
31,538
30,178
27,563
25,485
25,768

139,835
253,439
287,568

307,031
310,061
302,783

Total

Tons
136,447
193,387
235,328
253,325
293,991
427,692
561,841
618,190
664,425
686,179
711,773

Rate of
increase

Per cent
100. o
141
172
185
215
313

411. 8

453 I
486.9
502.9
521.7

Transportation by Land
The best way to discover what effect the war had upon
systems of land transportation in Japan, as in the case of
other branches of business, is to note the progress attained in
the following years. The only means of land transportation
in those days were wagons, rikisha and railways of various
kinds. How the paid-up capital of companies engaged in
land transportation increased in the several years subsequent

TRANSPORTATION AND COMMUNICATION

257

to 1896, the year in which the war was brought to an end, may
be seen from the table below:

Capital Investment in Land Transportation Companies, i 896-1903

Year

Steam
railways

Electric
railways

Railways
employing
hand cars

Tramways

Total

Yen

Yen

Yen

Yen

Yen

1896

90,103,974

796,827

90,900,801

1897

130,663,015

44,640

130.707,655

1898

155,881,965

30,000

155,911,965

1899

156,967,016

42,400

157,009,416

1900

184,201,311

2,535,534

254,227

2,431,972

189,423,044

1901

196,539,372

5,419,225

307,391

1,059,409

203,325,397

1902

212,926,155

7,158,750

374,872

1,058,392

221,518,169

1903

205,319,921

13,089,005

451.504

1,364,544

220,224,974

No other means of land transportation was affected by
the war as were the railways. Therefore it will be sufficient
to inquire into the condition of the railways during these
years.

In 1893, or before the outbreak of the war, one-half of the
Japanese railways was under government, and the other
half under private management. The average working
mileage of the government railways in those days was 558
miles and the average profit 16.91 yen per mile a day. The
private railways were maintained by 15 different companies,
and the average working mileage was 1,338 miles. ^ Profits
from the railways under private management were 7.10 yen
per mile a day; the rate of profit reckoned on the paid-up
capital was about 7 per cent. Such was the state of Japanese
railways before the war. In the next ten years, however, the
working mileage of the government railways increased to
1 ,282 miles, or more than double the total mileage in 1893, ^.nd
these railways brought in a profit of 21.82 yen per mile a day,
or an increase of 30 per cent over that of 1893. Meanwhile
the number of railway companies had increased to 41, and
their total working mileage to 3,070 miles, or an increase of

^ The average mileage owned by each of these companies was 89.2 miles, and the
paid-up capital 36,524 yen per mile.

18

258 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

130 per cent; their daily profit also increased to 16.91 yen, or
by about 140 per cent, compared with 1 893. This profit means
9 per cent on the paid-up capital of 67,845 yen per mile. Thus
the Japanese railways made considerable progress both in
mileage and profits in the ten years from 1893 to 1903. Let
us now make fuller inquiries into the condition of the rail-
ways, both government and private.

In 1893, or before the outbreak of the war, the Japanese
Government possessed 558 miles of railway, mostly what may
be called trunk lines. This dofes not imply, however, that the
Japanese Government neglected the construction of necessary
railways in those days. On the contrary, the government
promulgated the Railway Construction Law^ on June 20,
1893, whereby a program was announced for the construction
of railways in all parts of the country. This program, how-
ever, was to be carried out gradually in different periods. In
the first period, nine important lines were to be built at a
cost of 60 million yen, to be secured by a public loan. But as
soon as this program, or a portion of the greater program, was
initiated, the war with China began, and the government
naturally was compelled to suspend the work during the war.
But Japan won the war, and after peace was restored, the
Japanese Government in its postbellum program, prepared
on a scale commensurate with the elevated position now
occupied by the country, planned to improve the existing
government railway lines and build new ones by floating
public loans for this purpose. Thus the government agreed
to procure a loan of 27,731,331 yen"^, and of this total amount,
to spend 26,553,000 yen for improvement of the existing rail-
ways under the government, and 1,178,331 >'ew for construction
of a line between Sorachita and Asahigawa in the Hokkaido.
The government also agreed to build a trunk line on the same
island by raising a loan of 33 million yen."^ Then the govern-
ment planned to build railway lines on the island of Formosa,

1 Law No. 4.

* Public Works Loan Regulations, Law No. 59, promulgated March 29, 1896.
' ' Hokkaido Railway Construction Law, Law No. 93, promulgated March 13,
1896.

TRANSPORTATION AND COMMUNICATION 259

ceded to Japan as a result of the war, at a cost of 28,800,000
yen, to be defrayed by a portion of the Formosa Public Works
Loan.^ Then, too, the scope of the original program, as
announced before the war, was enlarged, and the appropria-
tion for the first period increased from 60 million yen to 95
million yen by Law No. 19, promulgated on April 2, 1901.

The new lines thus planned and the cost of their construction
were as follows:

Construction and Improvement of Government Railways, i 893-1903*

Construction of railway lines, 1 893-1903, built with pro-
ceeds of government railway loans: Yen Yen

Fukushima-Aomori line 20,773,993

Hachiwoji-Nagoya line 20,300,532

Shinonoi-Shiqojiri line 6,410,865

Yatsushiro-Kagoshima line 6,050,676

Tsuruga-Toyama line 9,407,302

Himeji-Sakai line 5.574,331

Kaidaichi-Kure line 2,152,600

Fukuchiyama-Sonobe-Maizuru line 1,341,459

Expenses for superintendence 200,019

72,211,777

Improvement of existing railways under government

management, 1896-1903, from proceeds of Government

Public Works Loan:

Tokaido line 21,097,422

Shinyetsu line i.039»545

Street railway line in Tokyo 2,763,340

Yokohama harbor line 28,404

Kobe harbor line 791,765

25,720,476

Construction of railway line between Asahigawa and

Sorachita, Island of Hokkaido 1,176,701

Construction of new lines, 1 896-1903, from proceeds of

Hokkaido Railway Loan 5,889,305

Construction of new lines, 1 899-1903, from proceeds of

Formosan Railway Construction and Improvement

Appropriation 14,894,227

Total 119,8^2,486

By these means the total mileage of the government
railway lines was increased considerably, as the table given
below indicates. The increase is indeed remarkable compared
with the total mileage of 558 miles in 1893. The following
table gives the annual increase, for the years 1 893-1903. ^

1 Formosa Public Works Loan Law, Law No. 75, promulgated March 20, 1899.
' Fractions over 50 sen are counted as whole yen; fractions under 50 sen are
disregarded.

' Railways built in Formosa during these years not included.

260 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Miles Chains

1893

1894 23 20

1895 12 40

1896 38 40

1897 30 03

1898 90 19

1899 40 29

1900 72 79

1901 81 74

1902 131 07

1903 _93 42

Total 613 53

All this extension of the government railways was a part of
the program which the Japanese Government, stimulated by
the war, had prepared to harmonize with the elevated position
assumed by the nation after the Sino-Japanese War. Not
only was this a direct effect of the war, but there was another
cause for this extension of the railways in Japan, namely,
the vast increase in the number of passengers and amount of
goods carried by train, due to the increased activity in the
ecomonic world in Japan after the war. This increase in both
passengers and goods naturally brought about a corresponding
increase in the profit from the railways. This cause may
therefore be called an indirect effect of the war. The number
of passengers and volume of goods carried, fare, gross returns,
business expense, etc., of the state railways are given in Table
I at the end of this chapter.^

The gross income, profit, etc., of these government railways
also increased in these years, as indicated in Table II at the
end of this chapter. ^

The progress of the government railways during these years
was remarkable in every respect.

Let us now look at the extension of private railways which,
like the extension of the government railways, was carried out
on a scale commensurate with the increase in economic activ-
ities after the war. This extension in the railways under
private management was also remarkable, as the increase in
the number of companies, their capital, working mileage, etc.,
given in the following table indicates.

» Post, p. 265. « Post, p. 266.

TRANSPORTATION AND COMMUNICATION
Extension of Private Railways, 1893- 1903

261

Year

No. of
com-
panies

Authorized
capital

Paid-up
capital

Reserve
fund

Loans

Average
working
mileage

Yen

Yen

Yen

Yen

1893. •••

15

63,145,000

48,869,515

517.975

5,680,000

1,338

1894.- •

20

80,290,200

59,176,637

1,322,085

5,778,000

1,457

1895. • • •

24

99,228,000

71,626,301

1,161,682

5,552,000

1,617

1896....

26

120,015,000

89,010,597

1,587,045

5,350,000

1,698

i897---

32

175,396,000

122,542,091

2,169,267

5,410,000

2,027

1898....

42

213,886,150

153,924.703

2,681,711

10,174,365

2,466

1899.- ••

43

227,799,300

169,999,444

3,374,353

10,640,400

2,725

1900.. . .

41

238,042,550

181,267,472

3,635,854

11,017,800

2,841

1901....

40

242,585,000

192,811,305

4,401,343

12,839,000

2,944

1902....

41

251,675,000

202,603,626

5,155,920

12,852,600

2,978

1903.- ■•

41

256,575,000

208,285,567

6,038,419

18,364,400

3,070

The business of these railway companies was stimulated by
the general activity in industry and commerce which followed
the war and their capital greatly increased, as Table II indi-
cates. Let us now note the increase in number of passengers,
volume of goods, etc., as given in Table III at the end of this
chapter.^

The increase in the number of passengers and volume of
goods carried by these railways naturally brought about a
corresponding increase in the receipts, as shown in Table IV
at the end of this chapter. ^

The railways in Formosa, which were entirely built by the
Japanese after their acquisition of the island, as a result of
this war, made a very good showing from the beginning, for
in a few years after construction these railways brought in
some profit, as Table V at the end of this chapter ^ shows.

In conclusion it may be stated that the war did not have
any direct effects upon or give any marked stimulus to
railway business in Japan; yet it is true that the railways
achieved considerable progress in the several years following
the war, because of the general awakening of the nation and
improvement in the country's position brought about by the
war. This progress made by the railways may therefore be
said to be, to no small extent, the result of the war.

^Post, p. 267. ^Post, p. 268. *Post, p. 269.

262 economic effects of the sino-japanese war

Transportation by Water
Merchant marine
In this section we shall give an account of the progress
attained by the various organizations constituting the mer-
chant marine of Japan, during these postbellum years. At
the outbreak of the war, many merchantmen were transferred
to the government service for the transport of troops and
munitions, and the merchant marine as a whole was somewhat
hampered in consequence. Especially was this the case with
coastwise navigation. But this temporary inconvenience was
soon remedied, for the government quickly chartered foreign
vessels and put them in the places of the replevined merchant-
men. For the remainder of the time, therefore, the Japanese
merchant marine did not sustain any serious injury from the
war, but remained in its normal condition. After the war,
the government, stimulated by victory, adopted all possible
measures to secure progress in the merchant marine, as in the
transportation systems on land. Help in the form of govern-
ment subsidies was given for the construction of good harbors,
for instance, at Nagasaki and Osaka, so that these places
might be converted into good trading ports. The construc-
tion of new vessels and overseas navigation were also en-
couraged by the aid of government subsidies. For the former
the government promulgated the Law to Encourage Ship-
building ^ on March 24, 1896, and for the latter the Law to
Encourage Overseas Navigation ^ under the same date. The
companies which enjoyed state bounty in accordance with
the former law were only such as were composed of Japanese
subjects, either wholly or in part, engaged in the building of
vessels, and owning docks equipped as specified by the
Minister of State for Communications. ^ An encouragement

* Law No. 16.

' Law No. 15.

'The rate of subsidy given in accordance with this law was 12 yen per ton of
gross tonnage for steamers whose gross tonnage was between 700 and 1,000 tons;
and 20 yen per ton of gross tonnage for those whose gross tonnage was i ,000 tons
or over. In case an engine also was built, an additional subsidy of 5 yen per horse
power was given for the engine.

TRANSPORTATION AND COMMUNICATION 263

bounty for overseas navigation was given those individuals
or companies composed either wholly or in part of Japanese
subjects that with their own steamers, registered by the Jap-
anese government, were engaged in the transport of goods or
passengers from a Japanese port to a foreign port, or from one
foreign port to another. ^ A steamer eligible to government
subsidy was to be made of either iron or steel materials, to be
the best grade of steamer, and possess all the necessary quali-
fications specified by the Minister of State for Communica-
tions. In addition any steamer eligible for the shipbuilding
encouragement bounty was to be of more than 700 tons gross
tonnage. And any steamer eligible for the overseas naviga-
tion subsidy was to be more than 1,000 tons gross tonnage,
and have more than 10 nautical miles maximum rate of speed.
Besides these two forms of government subsidy for merchant
marine, another system was devised for those steamers
engaged in navigation service to ports in America, Europe
and other foreign countries. This last form of subsidy was
inaugurated because the Japanese Government, desiring to
encourage the shipbuilding industry at home, was anxious to
encourage overseas navigation.

Through encouragement from the government and the
stimulus of the increased activity in commerce and industry
during these post-bellum years, the Japanese merchant
marine made remarkable progress in the several years follow-
ing the war, as Table VI at the end of this chapter ^ indicates:

The number of steamers, registered tonnage, number of
passengers, volume of goods carried, paid-up capital, etc., of
the three principal steamship companies in Japan, namely, the

1 In the case of a steamer whose gross tonnage was 1,000 tons, and whose maxi-
mum rate of speed was 10 nautical miles per hour, the rate was 25 sen per ton of
gross tonnage for each 1,000 nautical miles of the voyage. This rate of subsidy
was increased 10 per cent for every 500 tons increase in the gross tonnage, and 20
per cent for every nautical mile of increase in the maximum rate of speed per hour.
For steamers whose gross tonnage was more than 6,500 tons, or whose maximum
rate of speed was more than 18 nautical miles per hour, the same subsidy was
given as for a steamer whose gross tonnage was 6,000 tons, or maximum rate of
speed 17 nautical miles per hour. More or less discrimination was made accord-
ing to the age or whether the steamer concerned was built in Japan or abroad.

2 Post, p. 270.

264 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

Nippon Yusen Kaisha, the Osaka Shosen Kaisha, and the
Toyo Kisen Kaisha for the years 1 893-1 903 are given in
Table VII at the end of this chapter. ^

Communication

The war did not have any direct effect on the systems of
communication in Japan, but after the war the government by
an appropriation of 12,802,107 yen established new telephone
systems in Kyoto and fourteen other large cities, and at the
same time connected all these important points by telephone
with Tokyo and Osaka, the two largest cities in the Empire.

The first telephone in Japan was established between Tokyo
and Yokohama in 1 890. Then another line was run between
Osaka and Kobe two years later. The fifteen cities where
the government established telephones as a part of its post-
bellum program, at a cost of 12,802,107 3'^w» ii^ the years sub-
sequent to 1896, were Kyoto, Nagasaki, Niigata, Nagoya,
Sendai, Kanazawa, Hiroshima, Akamagaseki (Shimonoseki)
Fukuoka, Moji, Kumamoto, Sapporo, Hakodate, Otaru and
Utsunomiya. The appropriation referred to was apportioned
as follows :

Year

Annual appropriation

Year

Annual appropriation

1896

Yen

594,196

2,473,420

1,896,119

1,781,655

iqOO

Yen
2,349,786
1,807,587

I.6lS.S'l2

1897

19OI

1902

1903

1898

iSqq

268,556

Further than this there is nothing of importance to state
about the systems of communication in Japan in these post-
bellum years.

^Post, pp. 271, 272.

TRANSPORTATION AND COMMUNICATION

265

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266 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

1.

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268 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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TRANSPORTATION AND COMMUNICATION

269

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270 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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TRANSPORTATION AND COMMUNICATION

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272 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

a

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CHAPTER VII
EFFECTS ON PRIMITIVE INDUSTRY

It may possibly be correct to say that the Sino- Japanese
War had little direct effect upon primitive industry in Japan,
although indirect effects were noticeable here and there. For
instance, the interruption in the transportation of general
merchandise, both by land and water, due to the transporting
of troops and munitions at the outbreak of the war, caused a
lack of balance between supply and demand for the products
of various branches of primitive industry in the Empire. In
consequence the prices of such commodities as lead and other
contraband, coal, provisions, dried bonito, salted greens,
pickled plums, barley, soy beans and certain munitions, rose
somewhat.

It can not be denied that the rise in the prices of these third-
class commodities in particular gave their producers — farm-
ers, mine owners and fishermen — an opportunity to enlarge
the scope of their productive capacity and so to increase prof-
its. The rise in the prices of these commodities may there-
fore be regarded as an indirect effect of the war upon primitive
industry in Japan, but even this was not so great as to be
worth special mention.

But the measures that the Japanese Government adopted
as a part of its post-bellum program for the development of
various branches of primitive industry are worth special
notice, although they, too, may be called an indirect effect of
the war. These measures included the establishment of an
iron foundry under state management ^1 improvement in the
condition of rivers to secure better irrigation; the establish-
ment of more agricultural experiment stations and sericultural
training institutes, the enlargement of those already in exist-
ence, etc. Furthermore, the government established such

* Full particulars are given in Chapter II.
19 273

274 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

banking systems as the Japan Hypothec Bank of Tokyo, and
the banks of agriculture and industry located in various parts
of the country. All these banks engaged in the business of
lending money on security furnished by real estate. These
banks were started to give increased financial facilities to
farmers, who were suffering from the lack of funds for their
work. Of course these banks were imperfectly adapted to
their purpose of developing the agricultural industry in Japan;
especially in the case of farmers with small capital did they
prove defective. Nevertheless it can not be denied that these
banks gave an impetus to the agricultural industry and
practical assistance to farmers. This may be proved from
the fact that the greater part of the money that the Japan
Hypothec Bank and the banks of agriculture and industry
advanced in various parts of the country, through the system
of redemption by annual instalments, was lent to the irriga-
tion and earth-work guilds, all composed of farmers, as the
figures in Table I at the end of this chapter ^ indicate. There
is no denying the fact that they really did benefit many
farmers who had been suffering from lack of capital to carry
on their business.

Advances by Banks of Agriculture and

Industry, i 898-1 903

Year *

To agri-
culturists

To agri-
cultural
companies

For adjust-
ment of
arable land

Total

Grand total

1898

1899....

1900

1901

1902

1903.. ■•

Yen
2,297,870
7,163,043
11,095,842
13,342,196
14,931,925
17,194,710

Yen

18,001
25,126

34,595
58,852

Yen

5,270
4,869

4,431
60,241

Yen
2,297,870
7,163,043
11,119,113
13,372,191
14,970,951
17,313,803

Yen
3,687,490
10,522,750
16,647,648

19,994,537
21,701,288
24,296,668

■ Close of year.

Areas under cultivation in rice and wheat since 1893,
showing the improvement effected by the aid of the above-
mentioned banks, are tabulated on the next page.

1 Post, p. 276.

EFFECTS ON PRIMITIVE INDUSTRY 275

Areas under Cultivation in Rice and Wheat, i 893-1903

Year

Rice

Area under
cultivation

Price
(per koku)

Wheat

Area under
cultivation

Price
(per koku)

1893
1894

1895
1896

1897
1898
1899
1900
1901
1902
1903

Cho
2,769,478.9
2,736,494-6
2,784,682.5
2,792,499.4
2,787,181.3
2,817,624.0
2,839,550-2
2,828,459.9

2,847,357-3
2,847,191.9
2,864,139.1

Yen
7.08
8.24
8.21
9.16
II. 81
13. II

9-84
11.32
11.47
12.07
13-68

Cho
744,010.3
753.409-8
774,159-8
767,043.2

749,571-7
806,667.4
809,822.6
1,806,668.6
1,816,200.8
1,804,938.0
1,799,346.1

Yen

The areas under cultivation in rice and wheat as given in
the foregoing table refer to the lands on which rice or wheat
was actually raised, and not to the entire area prepared for
cultivation. Besides, the area of cultivated land changes
according to the conditions of crops each year or the price of
rice or wheat; therefore these figures can not be accepted as
exactly reflecting what these banks did for the agricultural
industry. Yet to some extent we may see by these figures
the progress made by their aid.

In addition, the government established a training school
to develop fishery experts, and adopted various other meas-
ures to improve the fishing and mining industries. As these,
however, are not worth special notice, we shall content our-
selves with a glance at statistics regarding the paid-up capital
of the companies engaged in the agricultural industry during
these years, as shown in Table II following.

276 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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CHAPTER VIII
SOCIAL EFFECTS

The national life of the Japanese people during the past
fifty years may be divided into two periods, with the Sino-
Japanese War as the dividing point. In the first period, that
is, from the Restoration of 1868 up to the Sino-Japanese War,
we accomplished, in addition to the Restoration which re-
placed the Shogunate with the Imperial rule, the introduction
of a modem system of administration in place of the old feudal
methods, experienced the Korean trouble, over which the
leaders of the country differed, with a serious reflection on
home politics as a result; and then went through the Saigo
Rebellion of 1877. Through these events Japan accomplished
great political reforms, her finances being so much affected
thereby that the government was obliged to issue inconverti-
ble bank notes to meet the needs of the time. In 1886, how-
ever, the finances of the country were put right, and the value
of paper money began to assume a close relation to that of
gold for the first time after many years of financial chaos.
On February 11, 1889, the Imperial Constitution was pro-
mulgated, and the Imperial Diet was opened in the following
year. The country was then just prepared to enter upon a
period of activity, both politically and economically, with the
one great aim of promoting the welfare of the nation, when
the Sino-Japanese War broke out.

Prior to this time, the Japanese had never had any experi-
ence with international warfare, in the true sense of the word.
They had had, it is true, frequent troubles with Korea and
Formosa before this, but these troubles could not be called
international war in the real sense of those words. In the
eyes of the Japanese of that time, therefore, it was a great
matter to be at war with China, the oldest and greatest coun-
try in the Far East, with a history running back 4,000 years
into the past. Indeed, the Japanese were somewhat appre-
278

SOCIAL EFFECTS

279

hensive as to the outcome. Fortunately for them they won,
and this victory gave them the chance to realize for the first
time the superior ability which they had been developing
since the time of the Restoration in 1868. "To manifest the
glories of the country to the world," was now the banner
under which both government and people were determined to
carry out their post-bellum program, prepared for the purpose
of extending victorious Japan's influence. In accordance
with this program the Japanese effected drastic reforms in
their military system, business methods, and machinery for
the promotion of culture.

Simultaneously the cost of living went up, and prices of
commodities and labor rose correspondingly. Development
in business methods resulted in the concentration of capital,
and naturally disturbed the balance in the distribution of
capital in consequence. The figures in the table below were
based upon the results obtained by the commission appointed
to investigate the currency system. They tabulated the
wholesale prices of about 42 principal commodities inthe

Prices of

Commodities in

Japan from 1873 to

1912

Year

Index-numbers

Year

Index-numbers

187-1

100. 0
100. 0
102.0
loi .0
102.0
104.0
109.0
108.0
103.0
lOI .0
103.0
106.0

IIO.O

107.0
109.0
115. 2
119. 2
122.2

117. 9
122.3

180-;

126. 1

1874. . . . ....

i8q4.^

135 8
143-5
154-9
174-I
182.7

187'^

I8QS''

1876

1896

1877 . . .

i8q7

1878.

l8q8

l87Q.

1800

182.5
195-2
186.3
182. 1

1880.

I goo

1881.

iqoi

1882

I qo2

1883 . .

iqO'?

195-2
200.9

1884 . .

I qo4.

i88«^

iqos

221 .6

1886

iqo6

230.3
248.8

241-3
229.1

1887 . . .

iq07

1888 . . .

iqo8

i88q

iqoq

1800 ....

iqio

235-6
247.8

* z7

i8qi

iqi I

1802

iqi2

265.1

« War time.

280 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

city of Tokyo, of about i6 different commodities in the city
of Osaka and of about 31 principal articles of export (prices
at place of export) .^ In addition, the results of similar investi-
gations made by the Bank of Japan concerning the prices of
about 40 of the principal commodities in the city of Tokyo
were used. As these figures indicate, the history of the rise
in the prices of commodities in modern Japan may be defi-
nitely divided into two periods, with the Sino-Japanese War
as the dividing point. Each period has its special features.

As the figures in the foregoing table show, in the twenty-
one years from 1873 to 1893, the prices of commodities in
Japan rose 26.1 per cent, or approximately 1.3 per cent a year,
but during the war with China and in the several years there-
after, or from 1894 to 1903, prices of commodities went up
69.1 per cent, or 6.9 per cent a year, and in the nine years
from 1904 to 1 91 2, or during the Russo-Japanese War and
several years thereafter, prices of commodities rose 69.9 per
cent, or 7.8 per cent a year. In a word, the prices of com-
modities in Japan were rising approximately i per cent every
year up to 1896, but since then they have been rising 7.8 per
cent on an average every year. These figures therefore denote
quite a revolution in the life of the Japanese people.

That the prices of commodities have been rapidly rising in
Japan since 1893 has already been stated. What were the
causes of this rapid rise? This is a question which has been
continuously investigated by government officials and indi-
vidual experts ever since, but no decisive conclusion has yet
been reached. As I understand it, however, one cause was
the disturbance of the balance between supply and demand,
especially in the case of rice, resulting in a rise in the price.
Another cause was a considerable increase in the volume of
currency in circulation, and yet another was the increase in
the taxes, particularly taxes on consumption. The questions
of currency and the increase in taxes will be dealt with later,
so we shall here consider only the price of rice. From time
immemorial, Japan has been known as a land of rice. Cer-

^ All these investigations were made from 1872 to 1893.

SOCIAL EFFECTS

281

tainly rice is the staple food of the country — the people in
general live on rice.^ How to keep the price of rice normal,
or to adjust the changes in it, always constitutes the initial
problem in the Japanese Government's policy as to prices of
commodities, and even as to economic affairs in general.
Now the price of rice has been constantly rising since 1893, so
great an increase as 90 per cent being observable in the ten
years from 1893 to 1903, as the figures in the table below
show:

Average Price of Rice throughout Japan, i 893-1 903

Year

Percentage

1893
1894
1895
1896

1897
1898

1899
1900
1901
1902
1903

100. o

117. 8
II5-9
129.4
166.8
185.2
139.0

159 9
162.0
170.4
193.2

It is a well-known principle that a rise or fall in the price of
a single commodity will produce corresponding changes in
other commodities, in the same market.

It is obvious, therefore, that a rise in the price of an impor-
tant commodity will be accompanied by a similar rise in the
prices of other commodities in one and the same market.
Besides rice, tobacco, another stable commodity in Japan,
also rose in price, after the government had established its
monopoly in the manufacture of the article. This rise in the
price of tobacco affected the prices of other commodities too.
Now concerning the rise in the price of rice, it may be stated
that the amount of the rice crop each year was partially re-
sponsible for it, but the principal cause of the rise in the price

1 Of the whole population of Japan, about 70 per cent live on rice, so far as I
hav^e been able to ascertain.

282 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

of rice was the increase in consumption of those living on rice
due to the general improvement in the standard of living in
Japan, and for this the increase in the income of middle and
lower-class people in recent years has been largely responsible.
Let us look at the ratio of prices of commodities and prices of
labor in the two largest cities in Japan, namely, Tokyo and
Osaka, during these years, as given in the table below^ :

Year

Tokyo

Prices* Wages**

Osaka

Prices" Wages'^

1893
1894

1895
1896

1897
1898
1899
1900
1901
1902
1903

100

lOI

107
119
133
139
145
159
148

145

148

100. o
109.2
118. 6
129. 1
140.2
145-8
147-8
167.2
169.7
170.6
170.2

100. o

106.0

III .9

126.

144

159

156.

173

173-5

173.0

181.8

100. o
III. 9

132.3
141. 7
161. 6
168.6
169.4
183.6

179-3
182.3
199.0

» Average prices of 3 1 dififerent commodities.
*> Average prices of 26 different kinds of labor.

" Average prices of 14 different commodities.
<J Average prices of 43 different kinds of labor.

These figures speak eloquently of the growing increase in
the income of middle and lower-clkss people in Japan, on the
one hand, and on the other unmistakably demonstrate a
steady rise in the price of labor in the same country. Both
facts were together responsible for the rise in the prices of
commodities during these years.

Wherever the prices of commodities and labor rise so
quickly, the condition of society must be far from tranquil.
Now, from the Restora;tion of 1868 to 1893, — a most eventful
period in Japan's history, including as it did civil wars and a
financial crisis, — the prices of commodities did not rise greatly^
but they rose steadily after the year 1893. This steady rise
in the prices of commodities could not but reflect the uneasy
current under the surface of society during those days.

* Based upon the investigations made by the Finance Bureau in the Finance
Department.

SOCIAL EFFECTS 283

The intervention of the three Powers, France, Germany and
Russia, after the Sino-Japanese War, which largely deprived
Japan of the fruits of her victory, seriously warned the Jap-
anese at large as to the probable future of their country, ai;id
they accordingly made up their minds to carry out a stu-
pendous post-bellum program to elevate the position of their
country among the Powers of the world. Yet the glorious
victory with which the Japanese concluded the war, coupled
with their expectation of an inflow of a large amount of capital
from foreign countries, because of the large indemnity which
China was compelled to pay to Japan as a result of the war,
weakened to some extent the apprehension created by the
intervention of the three Powers as to the future of their
country. In the financial world, in addition to the govern-
ment's post-bellum program, many "fake schemes" were
started by individual business men for various kinds of enter-
prises. In spite of their rotten foundations, these plans
worked smoothly for a while, and this fact tempted many
other adventurers to start similar bogus enterprises. Thus
was initiated a tendency which became well-nigh universal
in financial circles until the whole of the country was shocked
by the great financial crisis in 1901. The unusual rise in the
prices of commodities and labor in the years following the
Sino-Japanese War, as the figures in the foregoing table show,
was therefore nothing but a reflection of the insecure condition
of society in those days, when the majority of people lived on
false pretensions. Indeed, it may be stated that in those
pleasure-seeking days the people lacked sincerity somewhat in
their mode of life, and that under the surface of society was
running an indeed dangerous current.

For a few years after the Sino-Japanese War, the Japanese
people, like many others in similar circumstances, lived on
vaingloriously on account of their martial victory; yet they
recovered their senses again during the great financial crisis
of 1 901, and were able to meet the Russo-Japanese War in
1904 in full preparedness. All the circumstances attending
these events will be further examined in the following pages.

284 economic effects of the sino-japanese war

Prices of Commodities

An inevitable economic phenomenon of war is the sudden
rise in the prices of commodities which takes place in bellig-
erent countries after the outbreak of a war. The Sino-
Japanese War was no exception to the rule, as the statistics
on prices of commodities in Japan during and after the war
indicate. But in Japan except for those commodities whose
prices went up either because of interruption in the supply,
due to the outbreak of the war, or on account of shortage of
stock, chiefly munitions, prices did not rise during the war,
but did go up considerably after the war was over. Thus
during the war and approximately ten years following, the
wholesale price of the principal articles of merchandise in the
city of Tokyo rose about 50 per cent, as indicated in Table I
at the end of this chapter. ^

As the statistics in Table I indicate, the degree of the rise
varies with the three classes of commodities, namely, food-
stuff's, raw materials and manufactures, but it is true of all
three classes that prices rose after more than during the war.
Among the reasons for this rise, we may place the increase in
taxes, especially duties on consumption, post-bellum enter-
prises carried out by both government and individuals, in-
crease in the volume of currency in circulation resulting from
the business boom, and finally the luxurious mode of living of
the people at large. All these, which may be called bad
effects of the war, were responsible for the considerable rise in
the prices of commodities after the Sino- Japanese War.

As already stated, a rise in the prices of commodities in
these post-bellum years undoubtedly resulted from the war,
so I shall now dwell in more detail upon the effects of the war
upon prices of commodities in the two largest cities, Tokyo
and Osaka.

The first appreciable effect of the war was felt in commercial
circles, when the government chartered many of the vessels
belonging to the Nippon Yusen Kaisha and other merchant

^ Post, p. 303.

SOCIAL EFFECTS 285

marine companies, in the latter part of June, 1893, for the
transporting of troops and munitions. As this interruption
in transportation both by land and water — for railways, too,
were placed at the government's disposal for the same pur-
pose— came just at the time when the bulk of produce had to
be marketed, the supply was suddenly interrupted, and prices
jumped up in consequence. Especially was such the case
with munitions. In the early part of the same year, or at
least before June, the rate of interest was high and the price of
silver rather low. From these two causes, as well as some
minor ones, the prices of commodities in general had been
going up, and while it may not be correct to say that the rise
in the prices of commodities of that year was entirely an effect
of the war, we may safely say that the war was the principal
cause. The interruption to transportation at the outbreak of
the war without doubt brought about a shortage of foodstuffs,
etc., in the market, and merchants in anticipation of such a
shortage had bought up as much as possible, without con-
sidering whether the merchandise would sell well or not.
The articles whose prices thus rose were salted greens, pickled
plums, barley, soy beans, etc. Lead, which could be bought
for 6.50 yen or 6.60 yen per 100 kin before the war went up to
10.50 yen in September of the same year, because, being a
contraband, its importation was stopped after the outbreak
of hostilities. Coal, too (best brand of Karatsu and Ho-
chiku), jumped up to 48 yen in September, as compared with
31 yen or so before the outbreak of the war. Provisions also
rose 30 or 40 per cent, for they were imported at Neuchang and
Korea for the troops. But chinaware, umbrellas, silk fabrics,
etc., which are not daily necessaries of life, and also seaweed,
trade in which was interrupted by the outbreak of the war,
rather fell in price after the outbreak of hostilities. The
articles which were not affected by the war to any serious
degree were soy, bean paste, kerosene oil, and articles ex-
ported to Europe and America.

In May, 1895, the Sino-Japanese War was concluded.
Owing to the intervention by the three Powers, Japan re-

286 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

stored to China the Liaotung peninsula, once occupied by her
army. For a while the Japanese were discouraged by this
intervention but they soon recovered, and prepared for fresh
activities in business. Just at this time the Bank of Japan
began lending out money rather generously in business circles,
and the condition of the country's foreign trade became very
encouraging. The rice crop for the same year was very good.
Furthermore, a large amount of specie was brought to Japan
from abroad through China's payment of her war indemnity
and by the improved condition of foreign trade. Soldiers and
sailors returned home in triumph and were given decorations
and monetary gifts for their brave services at the front.
These factors naturally had their effect upon business through-
out the country, and prospects in general became far better.
In addition, enthusiasm for speculative enterprises became
almost universal among business men, and quotations on
stocks and bonds went up considerably; the volume of con-
vertible notes issued increased in consequence, as well as loans
made by the associated banks in Tokyo, and the business
done by the Tokyo Clearing House. For these phenomena
the development of industry may have been partly responsi-
ble, but the principal cause was the increase in the volume of
currency in circulation. If the volume of currency increases,
the prices of commodities will assuredly go up. In 1896, the
condition of the market became depressed, due to the govern-
ment's raising of the taxes, the bad condition of trade in raw
silk, cotton and tea, as well as the poor rice crop. Thus
during the first half of the year prices of commodities fell
somewhat. But this did not last long, for the Bank of Japan,
by using the indemnity from China and the increase in its
specie reserve, issued more convertible notes, which brought
about an increase in the amount of bank notes in circulation,
and thus the prices of commodities went up again.

In 1897 the amount of convertible notes issued continued to
increase. To make the matter worse the price of rice rose,
and the lower-class people suffered accordingly. In October
of the same year the government adopted the gold standard

SOCIAL EFFECTS 287

as the currency system of the country, but this change was by
no means effective in bringing down the prices of commodities.

In 1898 business in Japan suffered a great depression, owing
to the bad rice crop and the tense condition of the money
market then prevailing. Prices of commodities rose accord-
ingly. In the following year prices continued rising, and even
later were rather on the increase, on the whole, although not
without some fluctuations from time to time. It was from
1902 or thereabouts that business in Japan was finally freed
from all effects of the Sino- Japanese War. Thus the rise in
the prices of commodities during those years was caused by
the tense condition of the money market and the increase in
the volume of currency. And when we see that the Sino-
Japanese War and the post-bellum program of enterprises by
the government and people were entirely responsible for the
increase in the volume of currency, the rise in the prices of
commodities, and later the tense condition of the money
market, we can not but wonder how far-reaching was the
effect of the war upon the Japanese economic world.

The rise in the prices of commodities during and after the
Sino- Japanese War was principally due to such general
causes as increase in the volume of currency in circulation, the
tense condition of the money market, and an increase in the
purchasing power on the part of the general public, although
interruption in the supply of merchandise during the war and
the raising of taxes after the war may also be mentioned as
secondary causes. In the following pages we shall first note
the fluctuations in the prices of merchandise in general, and
then examine the case of each class of merchandise.

In Tables II-IV at the end of this chapter ^ the index num-
bers of the annual average wholesale prices of merchandise in
the cities of Tokyo ^ and Osaka, the largest commercial city in
Japan ^ are given for the period 1 893-1 903.

A comparison of these three tables shows us that the fluctua-
tion in prices of the several commodities differs according to

^ Post, pp. 304-310.

2 Investigations of the Bureau of Finance and of the Bank of Japan.

' Investigations of the Bureau of Finance.

288 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

the commodity, location, etc. For instance, the rate of
increase in Osaka was greater than that in Tokyo; and in
Tokyo, of the three kinds of merchandise, raw material rose
most, and foodstuffs next, while manufactured articles rose
least. However, generally speaking, the prices of these com-
modities fluctuated about the same in most cases, according
to the prevailing state of the financial and economic market.
And when we realize that it was due to the Sino- Japanese War
and its effects that the financial market of Japan in those years
was constantly disturbed and could not remain stable, we
must admit that the war was responsible for said fluctuations
in the prices of commodities, especially for the considerable
rise noted.

Let us now study the relation between the index numbers
for the prices of commodities as given in the above-mentioned
Tables II-IV and the percentage of the volume of currency
in circulation, as well as the amount of bank notes in circula-
tion, as given in Table V at the end of this chapter. ^

As the foregoing statistics indicate, the prices of commod-
ities rose during those years which saw the volume of cur-
rency in circulation increased, or in the years following.
Such being the case, the increase in the volume of currency in
circulation in the years following the Sino- Japanese War was
responsible, we may conclude, for the rise in the prices of com-
modities during those years. But as it may be premature to
draw such conclusions from investigations covering a period
of only a little more than ten years, I will give below the
results of my investigations as to prices of commodities and
percentage of currency in circulation during the period from
1887 to 1911.

These results of investigations covering twenty- five years
simply confirm my former conclusion. Such being the case,
it is not too much to say that the rise in the prices of com-
modities in the several years following the Sino-Japanese War
was caused by the increase in the amount of currency in circu-
lation due to the post-bellum financial and economic program.

^Post, p. 311.

SOCIAL EFFECTS

289

Comparison of Prices of Commodities and Currency in Circulation,

1887-1911

1887.
1888.
1889.
1890.
1891.
1892.

1893-
1894.

1895.
1896.

1897.
1898.
1899.
1900.
1901 .
1902.
1903.
1904.

1905.
1906.
1907.
1908.
1909.
1910.
1911.

Year

Index number for
prices of commodities

rerceniage 01 cur-
rency in circulation
(1886=100)

102. 1

100.8

107.9

105.2

III. 7

III .0

114. 4

103.4'

110.4*

106.2

114. 6

109.2

118. 1

120. 1

127.2

124.8

134 4

142.0

145 I

• 151 3

163. 1

166.4

171. 1

143.8*

170.9*

169.6

182.8

160.2*

174 5*

154- 5'

170.6*'

164 5

182.8

166.8

193-7

196.0

213.6

214-3

215-7

239 .2

233-0

256.1

226.0*

254-5'

214.6*

257-8

220.7

286.9

232.1

306.3

» Decrease, as compared with previous year.

After the Sino- Japanese War, the Japanese Government
raised the taxes on consumption of sake, tobacco, soy, etc., in
order to meet her financial needs following the war. Let us
look at the changes in the rate of these taxes.

(A) The tax imposed upon sake in general varies according
to the brand, and is very complicated compared with similar
impositions on other articles. We shall therefore here examine
the rate for the consumption tax upon refined sake (seishu)
only. The rate imposed upon this brand of sake was 4 yen
per koku annually in 1893, the rate having been decided in
accordance with Order No. 61, issued in 1882, but it was
raised to 7 yen per koku in October, 1896, to 12 yen per koku
in January, 1899, and to 15 yen in 1901.

(B) The rate imposed upon soy was at first i yen per koku

290 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

a year in accordance with Order No. lo, issued in May, 1885,
but it was doubled on March i, 1899.

(C) The imposition upon tobacco was a stamp duty of 20
per cent ad valorem from July i, 1888, until the manufacture
of tobacco was monopolized by the government on January
I, 1898. After the business was brought under government
management, returns from the business were at first 84 per
cent compared with the price for which the government bought
the business from individual concerns. The rate became 100
per cent from July, 1898, to August, 1900, 130 per cent from
August 22 of the same year, 150 per cent in 1901, and it was
quoted between 140 and 180 per cent, according to grade of
tobacco, in 1902. The net profit of the government from its
tobacco monopoly, or rate of income as compared with the
purchasing price of the business from individual concerns,
was 77.9 per cent in the fiscal year 1897 (from January to
March) ; 86.2 per cent in 1898; 94.0 per cent in 1899; 88.1 per
cent in 1900; 158.8 per cent in 1901; 178.8 per cent in 1902;
and 152.9 per cent in 1903.

The raising of the tariff rate by the government should also
be noted in connection with the rise in prices of commodities
during these years. In 1897 the Japanese Government pro-
mulgated its customs tariff law^ which took effect from
January i, 1899. According to this tariff law, the taxable
articles in Class No. i were 497, divided into 16 groups.
These articles were subjected to the imposition of a tax from
the minimum rate of 5 per cent up to the maximum rate of
40 per cent. By applying these rates of duty to the articles
imported into Japan from abroad during the year 1895, we
get an average rate of duty of 12.3 per cent. But as Japan
has a conventional tariff contract (treaty) with England,
France, Germany and Austria, this treaty too must be taken
into consideration. Even in that case the average rate of
duty was 10.52 per cent. Previous to the promulgation of
the said tariff law, the average rate of customs duty in Japan
"was 3.57 per cent. The following statistics show the relation

1 Law No. 14.

SOCIAL EFFECTS

291

between the amount of the government's income from cus-
toms duties and the prices of the imported articles upon which
duty was levied, for twenty years from 1889. As the figures
below indicate, the average rate of tariff duty in- Japan was
3.89 per cent for the ten years previous to the promulgation
of the said tariff law, that is, from 1889, but it increased to
11.37 per cent for the ten years 1 899-1 908 which followed the
promulgation of the said law.

Revenue from Customs Duties, i 889-1908

Year

Returns from
import duty

Value of imported

articles, upon which

duty was levied

Rate of
customs duty

1889
1890
1 891
1892

1893
1894

1895
1896

1897
1898

1899'
1900
1901
1902
1903
1904

1905
1906
1907
1908

Yen
2.863,
2,932,
2,401,
2,745,
3,098,
3,506,
4,238,
4,915.
5,295,
6,280,

13,251
16,764

14,457
14,727
16,372
20,519
34,298
41,230
46,959
44,817

,576
,637
,238
,777
,627
,500
,842
,289

,123
,620

,833
,165
,526
,596
,024
,938
519
391
,596
,856

Yen
63,403,345
65,795,098
54,822,790
64,299,862
79,462,140

103,195,819
118,680,124
130,431,094
139,975,246
165,522,430
136,489,625
200,458,007
165,214,574
151,037,567
168,547,397
208,450,952
294,268,906
281,337,980
307,358,291
281,399,648

Per cent

» New tariff enforced.

As the foregoing figures indicate there can be no doubt that
the raising of the rate of import duty influenced the prices
of commodities in Japan during these years.

The imposition of a consumption tax upon merchandise
brings about a rise in the price of that merchandise of approx-
imately the same amount, either more or less, according to
circumstances. Then a rise in the price of one article in-
fluences the prices of other articles which have relations with
that article in the same market. Therefore it may be stated

292 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

that the raising of the duty on consumption was the principal
factor in causing the rise in the prices of commodities during
these years in Japan.

Prices of Labor

As stated heretofore, the price of labor always rises more
rapidly and to a greater degree than the prices of commodities
in Japan, as the prices of labor and commodities during these
years in the two largest cities in the country, Tokyo and
Osaka, as given in the table below, indicate :

Prices of Labor and Commodities in Tokyo and Osaka, 1893-1910*

Tokyo

Osaka

Year

Labor

Com-
modities

Rice

Labor

Com-
modities

Rice

1893

100. 0
145-8
170.2

196. 1

193-9
196.5

100. 0
139-5
148.5
186.0
176.7
180.9

100. 0
200.7
176.3

213.5
178.7

179-9

100. 0
168.6
199.0
279-0
268.6
274.4

100. 0
159.5
185.3
224.1
217.7
220.2

100. 0

1898

196.4
194. 1
212 .0

TQO'^

1908

IQOQ . . .

173-7
176.3

IQIO

» For particulars of the foregoing figures, the previous section as well as statements that will be
given later on the same subject are referred to. But as the figures for the years 1908 and beyond
have been prepared especially for the above table, no further explanation of them will be given.

From the foregoing statistics it may be seen that the prices
of labor always rose higher than the prices of commodities,
especially rice. But we must first examine what changes the
price of labor has passed through since the Restoration of
1868, and then we can see what effect the war had upon the
prices of labor in general.

The table on the next page, prepared by the Bank of Japan,
gives a view of the prices of 24 kinds of labor in the city of
Tokyo from 1873 to 1910.

As these figures indicate, the price of labor did not rise
at all rapidly, from 1873 to 1893, or before the outbreak
of the Sino-Japanese War, but after that war it sud-
denly rose considerably. After the Russo-Japanese War

SOCIAL EFFECTS
Price of Labor in Tokyo, i 873-1910

293

Year

Price of labor

Year

Price of labor

l87'»

100.00
102.80

101.95
101.25
104.46
109.88
116. 17
125.92
127.58
129.96
130.58
126.03
127.29
127.38
126.42
126.63
125.79
123.17
121.29

1 802

124.04
124.92

135.25
152.00
158.29
166.58
179.75
185-43
194-38
203.17
200.08

1874.

l8q^

^"''t

i87q

I 8q4.

1876

i8q«;

z,'

1877

1896

1878

1897

1870

1898

1899

1880

I88I

1900

1882

1901

1902

190-^

188^

1884

200 . 50
201.38
210.29
219.91
225.32
237-54
233 -92
224 -54

i88s

1904

1886

1905

1887

iqo6

1888

1907

1889

1908

1 8qo

1909

i8qi

191O

( 1 904-1 905), the price of labor did not rise so rapidly as
it did after the Sino-Japanese War. It may be seen,
therefore, that the changing conditions in the economic
world following the Sino-Japanese War affected the price
of labor, too, for the great activity prevailing during
those years in economic circles increased the income of
the people at large, and brought about a rise in the people's
standard of living. The increase in the cost of living
thus brought about, naturally caused a rise in the price of
labor.

Let us further examine the relative prices of labor in both
Tokyo and Osaka, as investigated by the Finance Bureau of
the Department of Finance as well as by the Bank of Japan
for these years. Particulars are given in Tables VI, VII, and
VIII at the end of this chapter.^

As the figures in these tables show, the prices of labor
during the years specified advanced 6 or 7 per cent a year.
What relation the price of labor has to the prices of commod-
ities will be discussed in the next section.

^Post, p. 312-315.

294 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR
Prices of Labor in Tokyo and Osaka, i 893-1903

Year

In Tokyo
(of 26 kinds
of labor)*

In Osaka

(of 43 kinds

of labor)*

In Tokyo
(of 24 kinds
of labor)''

Average

Rate of in-
crease com-
pared with
previous year

1893

1894

1895

1896

1897

1898

1899

1900

1901

1902

1903

lOO.O

109.2
118. 6
129. 1
140.2
145 -8
147-8
167.2

169.7
170.6
170.2

100. 0
III. 9
132 3
141-7
161. 6
168.6
169.4
183.6

179.3
182.3
199.0

100. 0
108.3
121. 7
126.7
133-3
143-9
148.4
155-6
162.6
160.2
160.5

100. 0
109.8
124.2

132.5
145 0
152.8
155-2
168.8

170.5
171. 0
176.6

9
14

8
12

7

2

13

I
0
5

8
4
3
5
8

4
6

7
5
6

7-7''

a As investigated by Finance Department. ^ As investigated by Bank of Japan.

"Average.

Prices and Incomes

Since 1893, the prices of labor have fluctuated to a far
greater extent than the prices of commodities in Japan, as
was briefly stated in the foregoing sections. The following

Fluctuations in Prices of Labor and Commodities, i 893-1 903*

Year

1893
1894

1895
1896

1897
1898
1899
1900
1901
1902
1903

Prices of
commodities

100. 0
105.0
III .0

123. 1
138.8

147-9
148.8
162.7

156.4
154 2
161. 7

Prices of
labor

100. o
109.8
124.2

132.5
145 o
152.8
155-2
168.8

170.5
171 .0
176.6

Excess of rise in prices
of labor over rise in
prices of commodities

4-8
[3.2

9.4
6.2

16.8
14.9

» Figures for prices of commodities given in the above table are the average prices of 31 different
commodities in Tokyo and 13 commodities in Osaka, as investigated by the Finance Bureau, and
of 40 commodities in Tokyo, as investigated by the Bank of Japan. Details as to these figures
were given under *' Prices of Commodities," p. 284. Figures for the prices of labor are the average
prices of 26 kinds of labor in Tokyo, as prepared by the Finance Bureau, and of 24 kinds of labor
in Tokyo and 43 kinds of labor in Osaka, as prepared by the Bank of Japan.

SOCIAL EFFECTS

295

statistics, prepared by the Finance Bureau of the Department
of Finance and by the Bank of Japan, give the ratio of the
fluctuation in the prices of labor to that in the prices of com-
modities in the cities of Tokyo and Osaka.

As the figures in the foregoing table indicate, there is little
doubt that the increase in the income of the working people
of Japan during the years specified was proportionately
greater than that in the prices of commodities.

The income of a laborer belonging to the class referred
to is generally 30 or 40 sen a day, the highest not exceeding 95
sen. The annual income, therefore, must be less than 300
yen. A man of this rating certainly belongs to a financially
low class in society. We must therefore examine the incomes
of the middle and higher classes. Now as the people belong-
ing to these classes pay an income tax, we may determine
their income by studying income-tax statistics. The fol-
lowing table shows the number of people paying the third-
class income tax and their income : ^

Incomes

AND Income

Taxes,

I 893-1903

Amount

Index

No. of

Per-

Total

Per-

of in-

Per-

numbers

for prices

of com-

Ye

ar tax-
payers

centage

income

centage

come
per tax-

centage

payer

modities

Yen

Yen

1893

• . • 124,077

100. 0

91,313,447

100. 0

73^

100. 0

100. 0

1894

... 129,327

104.2

99,470,716

108

9

769

104 -5

105.0

1895

••• 134,732

108.6

107,553,679

117

8

798

108.4

III.O

1896

... 151,041

121. 7

127,299,728

139

4

843

II4-5

123 I

1897

• • • 172,764

1393

147,676,544

161

7

855

116. 2

138.8

1898

... 195,292

1574

168,480,424

184

5

863

117. 2

1479

1899

... 342,721

276.2

204,117,466

237

4

633

86.0

148.8

1900

■•• 431,378

347-7

253.251,341

291

7

617

83.8

162.7

1901

• • • 510,779

411. 7

291,256,213

334

9

599

81.4

156.4

1902

• . . 580,849

468.1

326,230,305

373

8

588

79 9

154 -2

1903

... 548,976

523 0

366,931,266

420.7

592

80.4

161. 7

^ The income tax of this class is levied on their individual incomes, after interest
on public bonds or debentures belonging to them has been subtracted. In other
words, it is levied on all incomes except those of legal persons, or those which accrue
from interest on public bonds or debentures payable in the territories of Japan
where the income tax law is effective.

296 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

As the above figures indicate, the number of taxpayers
belonging to this class steadily increased and in 1903 became
about five times as great as in 1893. But disregarding the
number, and considering the taxpayers of this class as a body,
we see that the rate of increase in their aggregated incomes
closely corresponds to the rate of increase in the prices of
commodities during these years. The increase in the number
of taxpayers and decrease in the amount of income per tax-
payer are phenomena arising from the revision of the Income
Tax Law, and from a stricter enforcement of the law, so
nobody will contradict us if we say that these phenomena do
not necessarily indicate a decrease in the aggregate income of
the Japanese people at large. In a word, as the entire income
of any one class in society is the collective income of the tax-
payers in that society, it is not improper to compare the
fluctuations in the total income of a country with the index
number of price. But in this connection a few points must
be borne in mind, (i) Excepting those who receive a stated
income from their earnings, there may be many who do not
report their entire incomes correctly and strictly to the govern-
ment. (2) As a result of the revision of the Income Tax
Law in 1899, the method of deciding as to taxpayers and of
estimating the amount of individual incomes was somewhat
changed. For instance, before the said revision, permanent
residents only paid an income tax, but after the revision, the
tax was obligatory not only upon permanent residents, but
also upon those who reside in one place for more than a year,
and also upon those who merely own property, or have busi-
ness interests, or carry on their occupations in any place where
this income tax law is effective. Again, before the said
revision, the taxable income of each individual taxpayer
included the whole of his income, but after the revision
incomes were divided into three classes: (i) income of legal
persons, (2) income from interest on public bonds or deben-
tures, and (3) income of individuals. From the income of
individuals was subtracted that part, if any such there were,
as certain shares of legal persons, upon which the income tax

SOCIAL EFFECTS 297

had already been levied by the government. So that the
above described amount of income tax is not the total of
individual incomes; moreover, the amount of the income tax
of each new taxpayer was given in full from the year when he
became qualified for paying the tax. This point, too, dif-
fered a little from the former regulations. These points must
all be taken into consideration if the method suggested above
for calculating incomes is to produce correct results.

We may sum it all up by saying that after the Sino-Jap-
anese War the incomes of the middle and higher classes in
Japan gradually increased with the improvement in the
economic condition of the country, so that the incomes of
these classes maintained much the same relation as before to
the prices of commodities, notwithstanding the rapid rise of
the latter during the years specified.

Cost of Living

During the Sino- Japanese War the style of living of the
Japanese people did not show any appreciable effects of the
war, but after the war a great change was observable.

When the war was concluded, the Japanese people in gen-
eral, stimulated by their recent victory, began to show a
tendency toward a more luxurious style of living. This
tendency was further encouraged by the increase in the in-
comes of the people, especially of the middle and lower classes,
due to the increased activ.ty in the economic world which
followed the war, and also to the distribution of monetary
gifts by the government among soldiers, sailors, etc., for their
services in connection with the war. Then, again, the war
awakened the Japanese people, and they began to adopt
many features of Western style to meet the various social
requirements of their improved mode of living. Thus, on
the one hand, the style of living in Japan was greatly im-
proved, but on the other, the cost of living was considerably
increased. As stated in the foregoing sections, the prices of
labor and the incomes of the people at large increased in pro-
portion to the rise in the prices of commodities during these

298 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

years. If we look only at these facts, the living conditions
seem to have been very encouraging, but when we consider
that the cost of living includes not only the daily necessaries
whose prices have just been quoted, but also house rent, bath
charges, etc., we shall understand more perfectly what effect
the war really had upon living conditions in Japan. Thus,
in the present section, we propose to examine the relation
between the increase in the incomes of the people and the
ratio of house rent, bath charges, etc., — items of expense
which constitute a part of the cost of living.

Before the Sino-Japanese War, with a view to ascertaining
the recent changes in the cost of living of the people, the
Monetary Investigation Commission appointed by the
Finance Department of the Japanese Government investi-
gated the prices of such commodities as rice, bean paste (miso),
salt, soy, firewood, charcoal, cotton fabrics, house rent and
bath charges in the city of Tokyo, made averages of these,
and compared these averages with the prices of labor and
commodities in the same city, as follows: •

Ratio of Cost of Living to Prices of Commodities and Labor, i 873-1 893

Items

1873

1877

1882

1887

1892

1893

Cost of living:

Rice

100
100
100
100
100
100
100
100
100

III

138

76

130

125
100
106
123
165

184
221
158
157
305
226
129
150
246

103

153
86

138
153
127
112
192
216

151
197
108
154
158

118
226
221

154
192

Bean paste

Salt

Soy

95
156

Firewood

Charcoal

162
165

Cotton fabrics

124

House rent

225

Bath charges

221

Average

100
100
100

119
107
106

197
95
90

142
104
131

168
122
128

166

Prices of commodities

Prices of labor

122
129

From the figures in the foregoing table it will be seen that
prices of labor rose steadily with the increased prices of com-
modities, but they remained far below the increased cost of
living. We shall now continue the investigation from the

SOCIAL EFFECTS

299

year 1893 on. As we have no authentic figures for house
rent and bath charges during these years, we shall first com-
pare the prices of daily necessaries with the prices of labor, and
then compare them with the rate of increase in taxes, which
was especially remarkable after the war. The average prices
of some of the daily necessaries in the city of Tokyo are shown
in Table IX at the end of this chapter.^

According to the figures in this table, the prices of labor
always advanced faster than the index number for the prices
of commodities. They also rose steadily year after year,
except in 1903, when they fell slightly. Bath charges, too,
rose gradually during these years, while house rent rose con-
siderably in response to improvement in the means of trans-
portation in the city of Tokyo. Such being the case, it may
be stated that the style of living of the people did not improve
commensurately with the rise in the price of labor and the
incomes of the people.

In addition we must note the changes in taxes, which in-
creased the financial burdens of the people, and indirectly
made improvement in style of living difficult. The increase
in the burden of each taxpayer (such as government, pre-
fectural, municipal, town and village taxes) was 50 per cent
in 1898, and 100 per cent in 1900, and this increase certainly
reduced the scale of living to a considerable extent. The
particulars are given in the table below:

Comparison of Wages, Cost of Living and Taxes, i 893-1903

Year

Prices of labor

Prices of daily
necessaries

Taxation

1893
1894

1895
1896
1897
1898
1899
1900
1901
1902
1903

lOO.O

109.8
124.2

132.5

145 o

152.8

155-2
168.8

170.5
171 .0
176.6

100. 0
109.2
118. 6

129. 1
140.2
145-8
147-8
167.2
169.7
170.6
170.2

100. o
lOI .2
105.2
III .9
133-8
148.6
187.2

199.5
211 .7
226.2
218.6

^ Post, p. 316.

300 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

In short, after the Sino- Japanese War, while the price of
labor rose, and the general income of the Japanese people
increased to a considerable extent, the burden of taxes in-
creased also, prices of commodities rose, and thus the general
cost of living advanced. In addition, the people developed
a tendency toward more luxurious living; therefore the style
of living in Japan did not improve at all during these years.
And it may also be stated that these obstacles to improve-
ment in the condition of living during these years all arose
from the Sino- Japanese War. See Table X at the end of this
chapter. 1

Population

The economic activity that followed the Sino-Japanese
War brought about much prosperity in cities throughout the
country, and as many kinds of industrial enterprises were
started in these cities, there was naturally, in consequence, a
general demand for labor in such places, especially in what
are known as the industrial centers of the country. In such
localities the price of labor and the income of the people in
general were rather higher than in the agricultural districts.
Large numbers of people, therefore, moved from the agri-
cultural districts to these industrial centers. They included
many ambitious young persons who, stimulated by the gen-
eral awakening after the war, left these districts to seek their
fortunes in cities. Thus the tendency was towards a con-
centration of population in cities during these years, as indi-
cated in the statistics given in Tables XI (i) and XI (2) at
the end of this chapter.^

As the figures in these tables indicate, the rate of increase
in the total population of the towns and villages was rather
small — smaller, except in 1898, than that in the whole popu-
lation of the country, and far smaller than the rate of increase
in the population of cities. Among towns and villages, the
population in those towns whose population is above 10,000
showed a considerable increase.

Let us now consider the number of towns and villages
iPo5/, p. 317. ^ Post, pp. 318, 319-

SOCIAL EFFECTS

301

whose population is less than 20,000 each (Class No. i); then
those cities whose population is above 20,000 but below
100,000 (Class No. 2) and finally those cities whose popula-
tion is more than 100,000 each (Class No. 3) with the popu-
lation of these cities, towns and villages, and then compare
them with each other. The rate of increase in the population
of the towns and villages of Class No. i is smaller than in the
case of Classes Nos. 2 and 3, and far smaller than the rate of
increase in the whole population of the country. The rate of
increase in the population of cities in Class No. 2 was a little
larger, and it was largest of all in the case of cities in Class
No. 3, as the statistics below indicate:

Towns and Villages Whose Population is Less Than 20,000 (Class No. i)

Year

Number of

towns and

villages

Total
population

Percentage of

number of

towns and

villages

Percentage of
population

1888

71,295
15,810

13,947
13,224
12,351

35,874,298
37,275.893
39,384,980
40,974,921
42,430,105

100. 0
106.0
109.0
III .0
118. 0

100 0

1893

1898

IQ06

104.4
no. 6
118 0

1008

126 0

Cities Whose Population is 20,000 and More but Less Than 100,000

(Class No. 2)

Year

1888

1893
1898
1903
1908

Number of
cities

50
61
72
80
95

Population

1,808,726
2,270,110
2,520,151
3,098,251
3.775.540

Percentage of
population

100
120

139
171
208

Cities Whose Population is 100,000 and More (Class No. 3)

Year

Number of
cities

Population

Percentage of
population

1888

1893
1898
1903
1908

2,422,455
2,514.973
3,497,910
4,469,564
5.536,835

100
104
144

185
229

302 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

The percentage of the whole population of the country
means the rate of increase in the whole population of Japan.
Observing the above figures in this light, it may be stated
that the rate of increase in the population of towns and vil-
lages, especially in those of small population, was less than
the rate of increase in the whole population of the country.
This indicates that the people of these smaller towns and
villages were moving to the cities.

The migration of people to cities is a phenomenon which is
unavoidable with the advance of society. And the Sino-
Japanese War, which brought about a general awakening of
the Japanese people, may be considered one of the principal
factors which caused the concentration of people in cities in
Japan.

SOCIAL EFFECTS

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310 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

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CHAPTER IX
CONCLUSION

The Sino-Japanese War was begun on July 25, 1894, ^^^
on April 17 of the next year a treaty of peace was concluded.
We have discussed in the foregoing chapters the effects of the
war, especially as to expenditure and econorhic phases in
general. It is not necessary to add more. Yet, on reflection,
we note two or three points which may be especially dwelt
upon in generalizing upon the phenomena which have here
been presented — in particular the age-long weakness of
China as exposed by this war and the awakening of Japan
which followed the conflict.

Prior to the Sino-Japanese War, the various nations of the
world had regarded China as a powerful nation and one not
to be held in contempt. There was a general belief in her
fighting strength, and because she had the Manchurian cav-
alry on land and the Peiyang fleet at sea at the beginning of
the war, they thought Japan would certainly be defeated.
But after the commencement of hostilities, China suffered one
defeat after another, and the dignity of that great Empire of
forty centuries was completely lost. The "sleeping lion"
at last became the "lioti that does not awaken." What a
tragic state of affairs! Thereafter, the "lion that does not
awaken," with her mild climate, rich natural resources, and
dense population, became the center of attraction for the
world. There followed, in quick succession, the acquisition
of important concessions — Kiaochow Bay by Germany
(March 6, 1898), Port Arthur and Dairen by Russia (March
27, 1898), Weihaiwei and Kow-loon extension by England
(June I and 6, 1898, respectively), and Kwangchow by France
(November 16, 1899). The acquisition of a concession by
one nation became the excuse for another nation to demand
one also, and the latter an excuse for more demands on the
part of the first. The European Powers were not satisfied

320

CONCLUSION. 321

with the mere establishment of a concession, but concluded
treaties for the nonalienation of territory, thereby establish-
ing so-called "spheres of influence." At last came the dec-
laration by America, in 1899, of the principle of the "open
door" and "equality of opportunity" in China. The prin-
ciple of the balance of power in Europe brought about a new
situation in the Orient. This was a by-product of the Sino-
Japanese War. Japan had to face this new situation, besides
undertaking various post-bellum enterprises. The conse-
quences of the Sino- Japanese War were indeed serious.

Now Japan began to realize her national strength, and in
view of the changed conditions in the Orient after the war,
planned the development of the national forces by starting
various ambitious undertakings quietly and with united
efforts. As a result, (i) expenditures increased, and (2)
consequently the taxes of the people increased, (3) the cur-
rency was inflated, owing to the various government post-
bellum undertakings and the initiation of private enterprises,
and (4) the prices of commodities rose suddenly. These
were the noteworthy features. We shall show below the
changed percentages as calculated on the basis of the year
1887 — the next year after the resumption of converting notes
into specie.

By the following table, we may ascertain the various
changes which took place from 1887 to 1903. With 1894-
1895 as the limit, we notice especially that there have been
extraordinary changes in all the various items except popu-
lation. Before the war, the fluctuation was generally very
slight, but since the war there have been extraordinary
fluctuations. This was the result of the people's changed
conceptions of Japan's position in the Orient, which material-
ized in the ambitious post-bellum enterprises heretofore
described. We consider these changes as a sign of extraordi-
nary development.

Thus after the war the phenomena of social life completely
changed from ante-war times. Society assumed an entirely
new aspect, as if completely revolutionized. In other words,

322 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR
Fiscal Statistics in Annual Percentages, i 887-1905*

Ye

ar Expenditure

Tax revenue

Currency in
circulation*

Average price
of commod-
ities

Increase in
population''

1887

100. 0

100. 0

100.8

102. 1

100. 0

1888

102.6

97.7

105.2

107.9

101.4

1889

100.3

107.6

III.O

III. 7

102.5

1890

103.4

99.2

103.4

114. 4

103-5

1891

105.2

97.2

106.2

no. 4

104-3

1892

96.6

101.4

109.2

114. 6

105.2

1893

106.5

105.7

120. 1

118. 1

105.9

1894'

98.3

107.6

124.8

127.2

107.0

1895"^

107.4

112. 7

142.0

134-4

108.3

1896

212.5

II5-9

151-3

145 -I

109.3

1897

281.5

143.7

166.4

163. 1

no. 6

1898

276.6

1551

143-8

171. 1

112. 1

1899

319.9

201.6

169.6

170.9

112. 8

1900

368.5

213-1

160.2

182.8

114. 4

1901

335-9

227.1

154-5

174.5

116. 3

1902

364.0

246.7

164.5

170.6

117. 9

1903

3141

243-1

166.8

182.8

119. 7

1904*

758.2

530.7

256.1

233 0

125.0

1905'

736.8

581.8

306.3

232.1

131. 7

• The percentage of the expenditure means the total amount of expenditure (net amount) ; the
percentage of revenue from taxes means the revenue from taxes and the revenue from the profits
of the monopoly bureaus. The percentage of currency was based upon the standard at the end of
1886, the percentage of prices of commodities on the average wholesale prices of forty of the prin-
cipal kinds of merchandise sold in Tokyo in January, 1877, and the percentage of population means
the population as registered at the appointed places of registry.

b At close of year. " Beginning of Sino- Japanese War.

^ Ending of Sino- Japanese War. « Beginning of Russo-Japanese War.

' Ending of Russo-Japanese War.

the Sino- Japanese War marked a new period, in which the
aggressive spirit of the nation so notably shown in the period
of the Restoration of Meiji had taken on new life after twenty-
five years of quiet, and was now to replenish the national
forces at home and develop her credit abroad. Furthermore,
the remarkable development of the nation within so short
a period was largely due to the spirit of enterprise shown
soon after the close of the war. So the effects of the war
as presented in the foregoing chapters really embody the
history of Japan's economic development after the Sino-
Japanese War.

What we regret is the fact that the policy of the Japanese
Government was not more carefully considered, since it was
on account of the extreme haste to meet the new situation
that the currency was inflated, the burdens of taxation were

CONCLUSION 323

extraordinarily increased, and the prices of goods went up;
consequently, while the income of the people generally in-
creased in due proportion, the government undertakings did
not fully meet the need of improving the living conditions of
the people. Fortunately, however, the people generally
showed a sincere devotion to the country and were not seri-
ously indignant because their living conditions did not im-
prove pari passu with the financial and economic develop-
ment of the nation. No serious social or political problems
arose at this time. This fact should be set forth in bold-
faced type in discussing the economic effects of the war.

In short, the economic development after the Sino- Japa-
nese War was in general so extraordinary that the phenomena
which attracted attention before the war were no longer
noticeable. But under all this apparent prosperity there was
running a dangerous undercurrent, viz., the aforementioned
rise in the prices of commodities, the inflation of the currency,
and the extraordinary increase in the government's revenues
and expenditures as well as in taxes. Thus we must not for-
get that the effects of the war upon the economic world had a
dark as well as a bright side. The bright side shone as the
people endeavored to utilize wisely the effects of the war in
meeting the new situation. The dark side was inevitable
from the passing condition of our economic world, the evils
resulting from the period of inconvertible notes, which had
just been tided over, having reasserted themselves as a by-
product of the post-bellum upheaval of economiiis. That the
war was the cause of all this cannot be denied. But the
nature of our economic world and the economic policies
pursued in Japan were, needless to reiterate, still more re-
sponsible for such a state of things. The Sino- Japanese
War was, indeed, a test of our national strength and resulted
in the self-realization and awakening of the nation, thereby
bringing in its train a notable economic development. But
there have been many examples in history of the downfall of
mighty empires even while enjoying great prosperity, such
as Alexander the Great, the Roman Empire, etc. Indeed,

324 ECONOMIC EFFECTS OF THE SINO-JAPANESE WAR

war is not a true cause of national greatness, nor victory in
war a sure means of bringing about such greatness. On the
contrary, there must be an irresistible rise in nationalism to
wage a victorious war, which will prove only the first step in
the advancement toward an ideal goal. The Sino- Japanese
War was no more, no less than that, and it is far from our
desire to extol the material and moral effects of war.

INDEX

Administration: increase of expendi-
tures for, 43, 102-3; general expendi-
tures for (1893-1903), 144.

Agriculture: prohibition of resale of
Japanese products of, in Kanlcyodo,
16; progress in, 89; Bank of Agri-
culture and Industry, 90, 94, 107,
175. 178 et seq., 193; expenditures to
encourage, 139 ; experimental stations,
273; capital invested in (i 896-1903),
277.

Amoy, 188.

Anshantan, captured by Japanese, 31.

Antung, Chinese evacuation of, 26.

Aomori, ic6.

Army: organization of, corps, 25-6;
size of, 35; rehabilitation of, 89-90,
94 et seq.; four year expansion scheme
(i 895-1 899), 97 et seq.; expenditures
for (1893-1903), 99-100; extraordi-
nary expansion expenditures for
(1896-1903), loi; use of Chinese in-
demnity for expenditures for, 120.

Asan, 19, 21-2.

Bakeuchu, 13.

Bank notes: 51; issued by Bank of
Japan (i 894-1 896), 55, 166, 286;
issued to meet extra expenditures, 56 ;
increased circulation of, 154; redemp-
tion of national, 162, 167, 191 -2;
guarantee reserv^e issues of, 166, 168
et seq., 200; issued by Bank of For-
mosa, 186-7; issuance of national,
189-90; issued (i 893-1 899), with in-
crease or decrease, 197-8,

Bank of Japan: 72, 82, 152, 155, 161,
193; loans to government by, 51, 59
et seq., 73, 75, 83, 158, 199; war ex-
penses met by note issue of (1894-
1896), 55, 166, 286; redemption of
loans of, 76; enlarged business of, 90,
156, 175; deposit of Chinese indem-
nity funds in, 122; purchase of bonds
by, 125; increased capitalization of,
176.

Banks: Hypothec and Industrial, 83,
90, 94, 175, 178 et seq., 274; national
banks, changed to ordinary, 83, 189-
9O1 193; of Agriculture and Industry,
90, 94, 107, 120, 274; subsidies to, 90,
103, 107, 120, 179, 182; bonds issued
by, 156; regulations concerning issue

of bank notes by, 161 ; reorganization
of, 175 et seq., 193-^; development of
realty, 178 et seq.; deposits and loans
of (1893-1903), 195; capital, de-
posits, profits and dividends of
(1893-1903), 207. See also under in-
dividual headings.

Banks of Agriculture and Industry:
subsidies to, 90, 107, 120, 179; estab-
lishment of, 94, 175; business of, 178
et seq. (1897-1903), 204-5, 274; re-
organization of, 193-4; loans by
(1894-1903), 202, 274.

Bellenue, French missionary, 9.

Ben, Li Sai, Korean Progressive leader,
12.

Bokueiko, Korean Progressive leader,

Bokukeiju, revolt of, 10.

Boxer Rebellion, 132.

Budget: of revenue and expenditures,
47-8, (1893-1913), 87-8; for army
and navy, 57, 87-8; for expenditures
after 1896, 90; for 1899, 131.

Business tax, 90, 129.

Chaimucheng, battle at, 27.

Chang, Li Hung, 12-3, 15; peace repre-
sentative of China, 33.

Chemulpo: 15, 21, 23; opened to trade,
12-3; Treaty of, 13-4.

ChihH, Province of, 31-2, 57.

Cholla, Province of, revolutionary
movements in, 17.

Chung-Chong, Province of, revolution-
ary movements in, 17.

Chungking, opened to commerce, 33,
.232.

Cities, towns and villages: increase in
annual expenditures for (i 893-1903),
138; ratio of increase of expenditures
for 1904 over 1895, 139; expansion of
expenditures for, 142; population of,
300-1,(1893-1903), 318-9; increase in
population of (1887-1905), in annual
percentages, 322.

Coal, rise in price of, 285.

Colonial Bank of Hokkaido: business
of, 175-6, 178 et seq.; reorganization
of, 193-4. .

Communications Office, expenditures
for (1894-1905), 36, 43, 46.

Conservative party, in Korea, 12 et seq.

325

326

INDEX

Currency: expended for war expenses
( 1 894-1 896), 57; scarcity of, 81, 83;
inflation of, 84-5, 154, 196; reform of,
system, 118, 161, 165, 232, 235; in-
creased volume of, 288; in circulation,
in annual percentages (i 887-1905),
322.

Customs, revenue from (i 889-1908),
291.

Disbursements, monthly (i 894-1 896),
59; for government and private rail-
ways (i 893-1903), 266, 268.

Education: improvements in system of,
84, 89, 94, 112; use of indemnity
funds to promote, 132; expenditures
for, 138-9, (1893-1903), 151.

Enterprises: comparison of expendi-
tures for post-bellum, with total an-
nual expenditures (i 894-1 903), gi et
seq.; revenue for post-bellum, (1896-
1903). 92; revenue for (1895-1905),
150; expenditures for (1895-1905),
141, 150; development of, 226.

Exchange, rates of, in London, Paris
and Berlin (1886-1895), 163.

Factories, number of, and capital in-
vested in (1893-1903), 212-3.

Factory hands: number of (i 893-1 903),
211 et seq., (1896-1903), 218; per-
centage of, to total population (1896-
1903), 220; percentage of adult and
minor, to total number of (1896-
1903), 221 ; comparison of number of
adult male to female (i 896-1903),
222.

Fenghuangcheng, 25; Chinese evacua-
tion of, 27.

Foreign Office: expenditures for (1894-
1903), 36, (1894-1895), 43-4.

Formosa: 6; Japanese expedition to, 11;
ceded to Japan, 33, 224, 229; fighting
in, 35; Bank of, 94, 175, 185 et seq.,
194, 206; expenses incurred in, 103,
109 et seq.; railways of, iii, 261;
loans for development of, 11 5-6; ex-
penditures for (i 895-1903), 146 et
seq.; production of sugar in, 229;
trade of, with Japan (i 897-1903),
230; passengers, freight, income, etc.
of railways of (1897-1903), 269.

Fortresses, expenditures for construc-
tion of, 98-9.

Foundary, iron: establishment of, 89,
94, 96, 273; expenditures for con-
struction of, 103-4; use of indemnity
funds for construction of, 120.

France: occupation of Kwangchow by,

7, 34, 320; interference of , in IJaotung
Peninsula, 33-4; tariff agreement
with, 233, 290.

Fukushima, 106.

Fusan: 9-10, 22-3; opened to trade, 13.

Germany: acquisition of Kiaochow Bay
by» 7» 34» 320; invitation to, to occupy
Korean territory, 12; interference of,
in Liaotung Peninsula, 33-4; mone-
tary system of, 162; tariff agreement
with, 290.

Goko, revolt of, 10.

Gold standard: adoption of, 83, 123,
159, 163 et seq., 225, 232-3, 286-7.

Great Britain : occupation of Weihaiwei
by, 7, 34, 320; invitation to, to oc-
cupy Korean territory, 12; inter-
ference of, in Liaotung Peninsula,
33-4; tariff agreement with, 233.

Griffis, Dr. William Elliot, cited, 8.

Hachioji, 105.

Haicheng, 25, 27, 29, 31.

Hanabusa, Yoshikata, Charge d'Af-
f aires at Seoul, 11, 13.

Hangchow, opened to commerce, 33,
232.

Heung-Sun, Prince, 9-10; Korean Con-
servative leader, 12-3.

Hiroshima: 43; Imperial army head-
quarters at, 22, 50; telephone exten-
sion in, 264.

Hokkaido: colonial development of, 90,
112; plan for railway construction in,
106, 258; bond issue for railway con-
struction in, 114; Colonial Bank of,
175-6, 178 et seq., 194.

Home Office: expenditures for (1894-
1903), 36, (i 894-1 898), 43-4.

Hongkong, branch bank at, 188.

Hooshan, Chinese defeat at, 26-7.

Hori, Lieutenant, military instructor in
Korea, 12.

Huanglinchi, 30.

Huayuankow, 27-8.

Hypothec Bank: establishment of, 83,
90, 94, 175; business of, 178 et seq.,
(1897-1903), 203; reorganization of,
193-4; advances made by (1898-
1903), 274, (1897-1903), 276.

Income tax: 131; returns from (1893-

1903), 295 et seq.
Indemnity: Chinese, to Japan, 12, 20,

33, 82, 119, 224, 286; transfer of, 57-

8, 77-8, 116; use of, for army expendi-
tures, 90, 120; revenue from, 96-7,
119-20.

INDEX

327

Industry: capital investment in (1896-
1903), 209-10, 219, 240, 243; progress
of, 211.

Industrial Bank: 194; business of , 188-
9, 206.

Inouye, Kaoru, vice-minister of Japa-
nese mission to Fusan, 10.

Inouye, Ryoka, Lieutenant Command-
er, 10.

Interest rates: in Osaka and Tokyo, 65;
on loans by laws Numbers 8 and 25,
77; paid on bonds (1893-1903), 117.

Isotake-no-Mikoto, 8.

Itom, Prince, 15.

"Japanism", 157-8.

Jingo, Empress, expedition of, to

Korea, 8.
Judicial Office, expenditures for (1894-

1903), 36, (1895), 43, 45-

Kai, Yuan Shi, Chinese Minister, 13-4,
16-7.

Kaidaichi, 106.

Kaiping, 27, 29.

Kanghwa Island Affair, 10.

Kankyodo, 16.

Kiaochow, German occupation of, 7,
34. 320.

Kin, Kin Gyoku, Korean Progressive
leader, 14; assassination of, 16.

Kinchow-ching, capture of, 28-9.

Kiuliencheng, 25; Chinese evacuation
of, 26-7.

Kiun, Kim Ok, Korean Progressive
leader, 12.

Kizuki (Izumo Province), 8.

Kobe: extension of telephone service in,
106; encouragement to navigation
from, 108.

Komatsu, Prince, General, Chief of
Japanese General Staff, 32.

Konwasai, battle at, 27.

Korai, overthrow of kingdom of, 4.

Korea: population and area of, 3;
Chinese and Japanese attitude to-
ward, 4 et seq.; 11-2; Japanese expe-
dition to, 8; trade with, 9, 12, 154,
237; independence of, 10, 14, 21; dis-
turbance in, 13 et seq., 35.

Kure, 106.

Kuroda, Kiyotaka, chief of Japanese
Mission to Fusan, 10.

Kwangchow Bay, leased to French, 7,
34, 320.

Kyoto: 124; extension of telephone
system in, 106, 264.

Labor: prices of, in Tokyo and Osaka
(1893-1903), 282, 292, 294; prices of

in Tokyo (1873-1910), 293, 312-3;
fluctuation of price of (1893-1903),
294; prices of, and commodities com-
pared with cost of living, 298; price
of, in Osaka (1893-1903), 3H-5-

Land tax, 130-1.

Legations and Consulates: expenditures
for ( 1 894-1 895), 44; increase of ex-
penditures for, 89.

Liaotung Peninsula: ceded to Japan,
33; retrocession of, 34, 78, 157-8; 168,
286; compensation for return of, 118.

Liaoyang, 25, 27.

Loans: public, 50, 54, 57-8; of Bank of
Japan, 51, et seq., 75, 83, 158, 199;
details of "First", 61 et seq.; regula-
tions for war, 64 et seq.; "Second",
66 et seq.; "Third", 68 et seq.; details
of first three, 69 et seq.; receipts from
war, 72; extraordinary special, 72-3;
"Fourth", 74; based on laws Num-
bers 8 and 25, 75 et seq.; for railway
and telephone improvement, 90, 114;
for expenditures for Sino-Japanese
War (1894-1910), 113; for industrial
enterprises, 114 et seq.; for Formosan
development, 115-6; sterling, 116; by
Hypothec Bank and Banks of Agri-
culture and Industry, 181, 202; out-
standing, of Hypothec Bank (1897-
1903), 183; of Colonial Bank of Hok-
kaido, 185; of banks (i 893-1903), 195.

Loochoo, 6; as a Japanese possession,
lo-i.

Manchuria, fighting in, 35.

Merchandise, value of, sold (1898-
1903), 242.

Merchant Marine: subsidies to, 254,
263, (1893-1903), 270 et seq., progress
of, 256, 262 et seq.

Min, Prince, assassination of, 14.

Miyake, Dr. Yujiro, cited, 157.

Monopolies: leaf tobacco, 90, 126; in-
creased revenue from tobacco, 132,
137; workings of, 134 et seq.

Motienling, 30.

Nagasaki: 13, 16; subsidy for harbor
improvement at, 262; telephone ex-
tension in, 264.

Nagoya: 105; telephone extension in,
264.

Naval Office: expenditures for (1894-
1903), 36; extraordinary expenditures
for ( 1 894-1901), 40 et seq.

Navigation, subsidies for, 103, 108-9.

Navy: rehabilitation and expansion of,
89-90, 94 et seq.; seven year expan-
sion scheme (i 895-1903), 97 et seq.;

328

INDEX

expenditures for (i 893-1903), 99-
100; extraordinary expansion expend-
itures for (i 896-1903), 102; use of
Chinese indemnity for, expansion
funds, 120.

Negotiable paper, handled (1893-1895),
225, (1893-1903), 239.

Neuchang, 285; encouragement to nav-
igation from, 108.

Niuchwang, capture of, 30-1.

Nodzu, Michitsura, Lieutenant-Gen-
eral. Commander-in-chief of Fifth
Army Division, 23.

Notes, government: issued, 160-1; re-
demption of, 189 et seq.; cleared
(1893-1903), 241.

Okuninushi-no-Mikoto, 8.

"Open door" policy, 321.

Opium War, 7.

Osaka: 124; interest rates in, 65, 75; ex-
tension of telephone service in, 106;
subsidy for harbor construction at,
262 ; prices of commodities and wages
in (1893-1903), 282, 292, 294; whole-
sale prices in (i 893-1903), 310;
prices of labor in (i 893-1 903), 314-5.

Oshima, Major- General, Japanese of-
ficer, 17.

Otori, Japanese Minister at Seoul, 22.

Ou, Hung Tiyong, Korean Progressive
leader, 12.

Oyama, General, Japanese commander-
in-chief of Second Army Corps, 25.

Panic: financial, 83, 174; of 1899 and
1901, 159, 283.

Paper money in circulation (1893-
1899), 171.

Payment plan of war bonds, 65, 67-8.

Peking, 9, 15; proposed attack upon, 32.

Pescadores, occupation of, 31-2; ceded
to Japan, 33, 229.

Phung Island, battle at, 19, 21-2, 49.

Ping-yang, campaign of, 21 et seq.

Population : of towns and villages, 300-
i» ( 1 893-1 903), 318-9; increase of
( 1 887-1 905) in annual percentages,
322.

Port Arthur: 25, 27; leased to Russia, 7,
34, 320; attack upon, 28-9.

Prices: rise of, 81 et seq., 153, 158, 161,
273; of tobacco, 136; of commodities
(1873-1912), 279-80, 284 et seq.; of
labor and commodities in Tokyo and
Osaka (1893-19 10), 282, 292; com-
parison of, of commodities with cur-
rency in circulation (i 887-191 1), 289,
311; of labor in Tokyo (i 893-1 903),
293-4, 312-3; fluctuation of, of labor

and commodities (i 893-1 903), 294;
wholesale, in Tokyo (1893-1903), 303
et seq.; in Osaka, 310; of labor, in
Osaka (1893-1903), 314-5; of neces-
saries in Tokyo (1893-1903), 316; of
commodities in annual percentages
(1887-1905), 322.
Progressive party, of Korea, 12, 14.

Railways: construction and improve-
ment of, 89, 94, 96, 103, (1893-1903),
I45» 255-6, 258 etseq.; expenditures
for new construction of, 105-6; con-
struction of, in Formosa,! 1 1, 261 ; vol-
ume of goods transported by (1893-
1903)* 227; capital invested in (1896-
1 903) . 257 ; extension of private ( 1 893-
1903). 261 ; passenger, freight, income
etc. of government (i 893-1 903), 265,
of private (i 893-1 903), 267, of For-
mosan (i 897-1 903), 269; revenue,
disbursements and profits of govern-
ment ( 1 893-1 903), 266, of private
(1893-1903), 268.

Receipts: monthly government (1874-
1876), 59; from war loans, 63, 72,

I 13-4..

Redemption: of war loans, 64, 66, 68,
75 et seq., 89, 113; Chinese indemnity
used for, of war expenses, 121 ; of na-
tional bank notes, 162, 167; of gov-
ernment notes and bank notes, 189
et seq.

Regulations for issue of war loans, 64
et seq.

Revenue: budget of, for war purposes,
47-8, (1894-1896), 56, (1893-1903),
87-8; monthly, for war purposes, 52-
3 ; from occupied territory, 55 ; for ex-
penditures for war, 58; for expendi-
tures after 1896, 90; for post-bellum
enterprises (i 896-1 903), 92; increase
of, 94; ten year plan for (i 896-1 905),
95; from telegraph system, 13 1-2,
137; from tobacco monopoly, 132,
137; expansion of, of local communi-
ties ( 1 893-1903), 142; excess of,
over expenditures (1893-1903), 143;
of government railways (1893- 1903),
266; of private railways (i 893-1 903),
268; from customs duties, 291.

Rewards, for war fund contributors, 43.

Rice: area under cultivation (1893-
1903). 275; average price of (1893-
1903), 281.

Rintsushin, 23.

Russia: Port Arthur leased to, 7, 320;
interference of, in Liaotung Penin-
sula, 33-4.

Ryuzan, 23.

INDEX

329

Sake, tax on, 90, 126, 129, 289.
Sanitation, expenditures for (1893-

1903), 151-
Sasebo, 31.

Scrip, war, issued, 55 et seg.
Seoul: 10; Japanese legation at, 11;

Treaty of, 15.
Shanghai, steamship service from, 108.
Shanhaikwan, capture of, 32.
Shantung: 30; fighting in, 35.
Shashih, opened to commerce, 33, 232.
Shimonoseki: 10; Treaty of, 33, 35, 109,

118; telephone extension in, 264.
Shiojiri, 105.
Shipbuilding: subsidies for, 84, 89, 109,

254, 262; increase in, 210, (1893-

1903), 256.
Sino-French War, 7.
Sinonoi, 105.
Soejima, Count, 9; Japanese envoy to

Formosa, 11.
Songhwan, battle of, 19, 22, 49.
Soochow, opened to commerce, 33, 232.
Soshojo, 22.
Soshimori, 8.
Specie: prevention of diminution of,

56-7; effect of war on reserve, 155;

decrease of reserve, 171.
"Spheres of Influence", 321.
Steamship lines: 107-8; subsidies to,

108-9, 263; statistics of, 270 et seq.
Stock exchange, effect of currency re-
form on, 165.
Subsidies: for shipbuilding, 84, 89, 109,

254, 262; to banks, 103, 107, 120,

(1897-1903), 179, 182; to Waka-

matsu Harbor Construction Co., 104;

to steamship companies, 108-9, 263.
Sugar, imported from Formosa, 229.
Sujin, Emperor, expedition of, to Korea,

8.
Susano-no-Mikoto, 8.

Tal-Wonkun, 9.

Takezoe, Shinichiro, Japanese Minister
to Korea, 14.

Takushan, 27.

Taiko, HIdeyoshi, expedition of, to
Korea, 8.

Tamushan, naval battle at, 24.

Taohotsuon, battle at, 27.

Tariff rates, 233-4, 290.

Tatungkow, capture of, 27.

Taxes: increase of, %i et seq., 90, 126 et
seq., 280, 289 et seq.; readjustment of,
95; income from, 127; to defray ex-
penditures of Boxer Rebellion, 132-
3; business, 228; comparison of, with
wages and cost of living (1893-
1903), 299; levied (i 893-1903), 317;

revenue from, in annual percentages
(1887-1905), 322.

Teijosho, 13.

Telegraph, revenue from, 131-2, 137.

Telephone system, extension of, 89, 94,
103, 106-7, 255, 264.

Tienchwangtai, capture of, 30-1.

Tientsin: 14; Treaty of, 5, 15, 17,
steamship service from, 108.

Tobacco: establishment of, monopoly,
90, 126; workings of, monopoly, 134
et seq.; revenue and profit from, 132,
(1898-1903), 136-7; advances in man-
ufacture of, 210; rise in price of, 281 ;
tax on, 290.

Togakuto Affair, 6.

Tokyo: 11, 124; interest rates in, 65, 75;
extension of telephone service in, 106;
prices of commodities and wages in
(1893-1903), 282-3, 292; price of la-
bor in (i873-i9io),293, (1893-1903),
294, 312-3; wholesale prices in (1893-
1903), 303 et seq.; prices of necessaries
in (1893-1910), 316.

Tong Hales, revolutionary movement
of, 17-8.

Torpedo boats: number used during
"^'^r, 35; use of indemnity funds for
constructing, 97.

Toyama, 105.

Trade: with Korea, 9, 12, 154, 237; ex-
pansion of foreign, 89, 158, 230 et seq.;
decrease of foreign, 168; foreign
(1893-1895), 225, (1893-1903), 239,
( 1 868-1 903), 244 et seq.; between
Japan and Formosa (i 897-1903), 230.

Transportation: progress in, 254 et seg.;
capital invested in (1896-1903), 255.

Treasury Office, expenditures for
(1894-1903), 36, (1894-1897), 43. 45-

Treaties: of Tientsin, 5, 15, 17; of 1876
(Korea), 10 et seq.; with western
Powers, 12; of Chemulpo (1882), 13-
4; of Seoul, 15; of Shimonoseki
(1895). 33. 35; commercial, 234.

Tsuboi, Rear Admiral, 21.

Tsung, Tai, Emperor, 8.

Tsuruga, 105.

Ujina, 23, 32.

United States: Chinese treaty with, 12;
monetary system in, 162; tariff agree-
ment with, 233.

Vladivostok, steamship line from, 108.

Wages: rise In, 85; of factory workers
compared with, of independent work-
ers ( 1 899-1 903), 223; of factory

330

INDEX

workers compared with prices of
commodities (i 899-1 903), 223; com-
parison of, with cost of living and
taxes ( 1 893-1903), 299.

War funds: extra, 47-8; subscriptions
to, 54; shortages in (i 894-1 896), 60.

War Office: expenditures for (1894-
1903), 36-7; extraordinary expendi-
tures for (1894-1901), 38^.

Warships, number engaged in war, 35;
use of indemnity funds lor construc-
tion of, 97.

Weihaiwei: 19, 25; leased to Great
Britain, 7, 34, 320; attack upon, 30
et seq.; expenditures for guarding, 97,
no, 118; use of Chinese indemnity
for guarding expenditures of, 120.

Wheat, area under cultivation (1893-
1903), 275.

Wiju, attack on, 26.
Wonsan, 9, 18, 22-3; opened to trade,
12-3.

Yamagata, Aritomo, Minister of War,
10, 23, 25.

Yingkou, 30.

Yokaichin, opened to trade, 13.

Yokohama: extension of telephone
service in, 106; steamship line from,
108.

Yokohama Specie Bank: 90, 173, 193;
business of, 175; increased capitaliza-
tion of, 176; development of, 177;
loans made by (1893-1903), 201.

Yungching, 30,

Yungancheng, battle at, 27.

Zempojun, leader of Tong Haks, 17.

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